An online giant sees its margins contract as it replaces physical delivery with digital delivery. Revenue's growing. Profitability's shrinking. It may even post an operating loss during the next quarter. Not many months ago, this was Netflix. Now, it's Amazon.com.
The Kindle Fire hits the market next month, and the $199 tablet is already a "hot" seller. This would normally be the kind of news that would send board rooms into a frenzy of high-fives, but Amazon won't turn much of a profit on the entry-level tablets. Then again, it may not need to.
Amazon's spending on expansion will eventually help its bottom line, but right now it's costing the online retailer on Wall Street. The company's third-quarter net income fell 73 percent despite revenue growth as Amazon built sales fulfillment centers at a rapid clip. Neither that drop nor its revenue outlook for the current quarter made investors happy.