Amazon’s Profits Down Substantially in First Quarter of 2013: For Good Reason?

When virtually anyone hears the name, “Amazon,” the first thing they visualize is a successful company that allows buyers and sellers to exchange goods in a very convenient manner via the Internet. They might also think about their large selection of multimedia products, such as eBooks, a media source they practically started. Despite the fact that Amazon is a household name anywhere you go, you would think otherwise if you knew that their profits had fallen by 37 percent during the first three months of 2013, but this was actually expected so there is no need to worry if you are an avid Amazon fan.

When most people think about profits, they visualize the money in their bank account. To them, if they do not have as much money adding up in their checking or savings account as they did at the same time last year, they are either overspending or their boss has short changed them on their check. Amazon, on the other hand, like many companies, will experience periods of massive fluctuation in the profit department. This is due to the fact that they are having to pour what would be increased profits into better their company by coming out with new products and continuing to make their website easier to use on at least a yearly basis.

So, when Amazon says that their profits are down by 37 percent, it is not due to the fact that sales are down as it has more to do with the fact that they are essentially reinvesting 37 percent of their profits into improving their company. As a result, their stock prices may drop as it will definitely scare some investors; however, Amazon and those who understand the finances of business in general know that this is far from being a new experience for any major corporation.

To be precise, Amazon’s net income dropped to $82 million from its $130 million during the first quarter of 2012. Revenue, on the other hand, actually increased from over $13 billion to in excess of $16 billion. The increase in revenue, which was to the tune of 22 percent, reaffirms the fact that Amazon is far from being in danger and that they will be continuing to do big business for many years to come.

What will Amazon’s next move be?

Jason Russell is our resident technology expert covering everything technology related. He is a total technology geek and no one knows technology better than him.

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