LOSSES JUMP AT AMAZON, AS INVESTMENTS PILE UP

Original Story: nytimes.com

The chickens are not coming home to roost at Amazon just yet, but they are checking the flight schedule to Seattle.

Three months ago, Amazon was expected to lose 7 cents a share in the third quarter. After the retailer warned that it was investing so heavily in so many things, analysts pushed their loss projections up aggressively to 74 cents a share.

Even that was not enough. After the market closed Thursday, Amazon reported that it lost 95 cents a share. There was other disappointing news, too: Revenue came in $260 million less than analysts’ projections, and the company said it might lose money again in the fourth quarter, which in the old days was when retailers made all their profit for the year.

Even revenue growth, Amazon’s powerhouse, is fading a bit. The company said revenue would rise between 7 percent and 18 percent in the fourth quarter. In the fourth quarter of 2013, revenue rose 20 percent from 2012.

Amazon’s story for several years has been that it is growing furiously, investing heavily and postponing profits until the halcyon days just around the corner when it will sell all things to all people all the time. That took the company stock on a wild ride, pushing it up to $400 a share early this year.

But Wall Street has been questioning those assumptions in recent months, and those questions forcefully surfaced again after the earnings report. The stock fell 10.7 percent to $279.75, shaving about $15 billion off the company’s valuation.

The results also indicated that the company’s take-no-prisoners attitude toward its suppliers might be catching up with it.

During the third quarter, Amazon was engaged in a highly public scrap with Hachette, the fourth-largest book publisher, over pricing of electronic books. Amazon is discouraging sales of Hachette books as a way to gain leverage in the confrontation. That in turn has provoked protests from authors and negative publicity for Amazon.

That unfavorable publicity could be having an effect. One particularly weak segment for Amazon in the third quarter was North America media sales, which means books, movies and music. It increased a mere 4.8 percent from 2013.

That was the slowest growth for the category in more than five years and a sharp slowdown from the 13.4 percent increase in the second quarter, said Colin Gillis, an analyst with BGC Partners.

Amazon’s chief financial officer, Thomas J. Szkutak, said in a conference call with analysts after the earnings were released that a shift to renting textbooks rather than buying them and a strong 2013 quarter were responsible for the drop. But Mr. Gillis was unconvinced.

“This was a violent deceleration in growth,” he said. “The controversy with the publisher likely also contributed to the slowdown.”

During the call, the analysts were a bit more restive than usual, questioning when the long-promised payoff for Amazon’s heavy spending would come true. “When things don’t go as anticipated,” one asked, “what’s the process for determining whether to plow ahead or turn back?”

Mr. Szkutak answered that there were “things that go great, and things that don’t go as well as others.”

Here are some of the things that went well. Amazon’s tablet line was refreshed during the quarter to enthusiastic reviews. The dark comedy series “Transparent,” an original production for the Prime membership club, got good notices. Fire TV, introduced in the spring, has turned into a popular streaming box. The grocery delivery service expanded to Brooklyn. Amazon bought Twitch, a popular streaming site, to bolster its gaming opportunities.

On the other hand, the third quarter was marred by the disastrous reception of the Fire phone, Amazon’s long-awaited and much promoted entry into the smartphone market. A marketing survey of 500 Amazon customers could not find any who reported owning a Fire. A great many of the reviews on Amazon’s own site give the Fire the lowest possible rating.

A $200 price cut last month briefly pushed the phone up on Amazon’s list of top-selling electronic products, but it quickly fell off again. Thousands of employees spent years developing the phone. It is a rare case of Amazon completely misjudging the appeal of a new product.

Mr. Szkutak said Amazon had $83 million worth of inventory of the phone at the end of the quarter. That should last until the sun goes dim.

Michael Pachter of Wedbush Securities was a mild dissenter on Amazon before the earnings came out, citing “a variety of customer experience enhancements” that will soak up potential profits. These enhancements include a streaming music service recently introduced by Amazon. It is free for Amazon Prime members.

Spending on video and music content will total $2 billion this year and $2.5 billion next year, Mr. Pachter wrote.

Mr. Szkutak said the free content was doing its job, with customers who used the streaming video feature renewing at higher rates and buying more physical goods.

But if the executive sounded one theme during the call, it was that even Amazon realizes there are limits.

“We’ve certainly been in several years now what I would call an investment mode,” Mr. Szkutak said. “There is still lots of opportunity in front of us, but we know we have to be very selective about the opportunities we pursue.”

For nearly every retailer, including Amazon, the fourth quarter is the biggest. As usual, Amazon gave a wide range for its guidance, saying it might lose as much as $570 million and make as much as $430 million. In 2013, it made $510 million in the fourth quarter.

“I think that the potential for a loss in the fourth quarter is what is freaking people out,” Mr. Pachter said. “It is inconceivable that Amazon would lose money during the holidays, at least to someone who bought the stock above $300.”

Barnes & Noble Takes on Technology

First appeared in the Wall Street Journal

Barnes & Noble Inc. is the latest old-school company to discover how costly it can be to try to reinvent itself for a digital future.

The nation's largest bookstore chain warned Thursday it would lose twice as much money this fiscal year as it previously expected, and said it is weighing splitting off its growing Nook digital-book business from its aging bookstores.

Over the past 15 years, rapid technological change has transformed the company from a dominant retailing force that left smaller booksellers quaking in fear to a struggling giant grasping for a plan to ensure its long-term relevance to the publishing industry.

Barnes & Noble realized early on that e-books could appeal to consumers, but allowed Amazon.com Inc. to get an early leg up. Now it is locked in a battle with Amazon and another deep-pocketed rival, Apple Inc., to sell both electronic books and the high-tech devices consumers use to read them.

Digital technology continues to roil all manner of once-dominant companies. Former giants such as Blockbuster Inc., Circuit City and Barnes & Noble's main book-chain rival, Borders Group Inc., have struggled mightily—and in some cases, disappeared altogether—in the face of digital competitors including Netflix Inc. and Amazon. Wednesday's news that Eastman Kodak Co. was contemplating seeking Chapter 11 bankruptcy protection underscored the severity of the technology threat.

Barnes & Noble's stock fell 17% on Thursday. The company now may be at its most critical juncture since its chairman and largest shareholder, opened his first store in New York's Greenwich Village in 1965.

As recently as the 1990s, Barnes & Noble was known as a carnivorous competitor with the power to wipe out independent bookstores with its steeply discounted books and sprawling stores where customers could sip coffee and read in plush chairs. In New York City, the emergence of a Barnes & Noble on the Upper West Side was partly responsible for the mid-1990s closing of the beloved neighborhood bookseller Shakespeare & Company—the kind of narrative arc that cropped up in the movie "You've Got Mail."

Ironically, Barnes & Noble had been one of the first to recognize the potential of digital books. In 1998, it invested in NuvoMedia Inc., maker of the Rocket eBook reader, and the bookseller actively supported digital-book sales. But in 2003, it exited the still-nascent business, saying there wasn't any profit in it.

It wasn't until 2009 that Barnes & Noble re-entered the business, introducing its Nook e-reader. By then, Amazon had been selling its Kindle device for about two years, and was offering best sellers for $9.99, a fraction of what hardcover best sellers are priced at.

Apple introduced its iPad tablet in January 2010. Amazon responded with its competing Kindle Fire tablet this past September, and in November, Barnes & Noble introduced its Nook Tablet.

E-book sales have skyrocketed, jumping to $863 million in 2010, from $62 million in 2008, according to BookStats, a joint-research venture between the Book Industry Study Group and the Association of American Publishers. One publisher predicted Thursday that e-books could account for as much as 40% of total revenue by the end of the year.

Although Barnes & Noble was late to the game, its devices have won critical praise, and publishers estimate today that it controls as much as 27% of the digital-books market. "We saw more growth with e-books with Barnes & Noble this Christmas than anybody else," said the publisher.

But those sales have come at an enormous cost. Developing, manufacturing and promoting e-readers and tablets requires heavy upfront spending. Barnes & Noble's spending on advertising has more than tripled since 2009, according to Kantar Media, an ad-tracking unit of WPP PLC. To promote the Nook, the retailer returned to national TV advertising in 2010, after a 14-year hiatus, buying spots on popular programs such as "American Idol."

The heavy Nook investment has squeezed Barnes & Noble's bottom line. Largely as a result, its earnings before interest, taxes, depreciation and amortization—a critical measure of earnings—fell to $163 million in the fiscal year ending April 30, 2011, from $281 million in fiscal 2010.

When Barnes & Noble's stock weakened, the company came under pressure from an activist investor. In response, the chairman, who maintains control with a stake of about 30%, put the company up for sale in August 2010. Last May, Liberty Media Corp. made a bid to buy the business. The chairman appeared to support the bid, but Liberty Media eventually opted to invest $204 million for a 16.6% stake, receiving two board seats.

This holiday season has offered a ray of hope. Barnes & Noble said device sales had risen 70% for the nine-week period ending Dec. 31, compared with the year-ago period. It said the Nook business is likely to notch $1.5 billion in sales in the current fiscal year, compared with $880 million a year earlier. That business includes the Nook devices, digital-book sales, accessories, magazine and newspaper sales, app sales and sales of warranties.

On Thursday, Barnes & Noble increased its projected loss per share for the current fiscal year to between $1.10 and $1.40, from the 30 cents to 70 cents it reaffirmed one month ago.

Barnes & Noble blamed an unexpected shortfall of sales of the Nook Simple Touch e-reader on a Christmas where consumers embraced color digital devices, including the Nook Tablet and Amazon's Kindle Fire. The e-reader sales shortfall is significant because of its ripple effect on projected sales of related products, including e-books and accessories.

"We over-anticipated the demand for the holiday season," said the company's chief executive officer.

He said Barnes & Noble has plenty of capital to continue financing the Nook expansion, including a $1 billion credit line.

But in a comment at an investor conference on Wednesday,the Liberty Media Chief Executive hinted that Barnes & Noble might need help to continue building the business. Competing with Apple and Amazon, he said, was a "big-boy game." He said Barnes & Noble may find "partners to help fund that game, meaning the public or strategic partners."

Barnes & Noble said in a statement on Thursday it was "in discussions with strategic partners including publishers, retailers and technology companies in international markets." It said that could lead to expanding the Nook business overseas.

One possibility is that Barnes & Noble could sell a minority stake in the Nook business in a public offering. The two businesses would likely have different managements and different boards. Under such a scenario, Barnes & Noble would continue to have close ties to its Nook devices. Another possibility is selling the Nook business outright.

A portfolio manager for Aria Partner, a Boston-based investment firm that owns a stake in Barnes & Noble, suggested one logical buyer could be Google Inc., whose e-book store has had only a minimal impact so far. "The Nook business alone could be worth $1.5 billion," said the manager. The Nook runs on Google's Android software. Google declined to comment.

Another potential partner is Microsoft Corp., people familiar with the situation said. Microsoft declined to comment.

The idea for splitting off the Nook business may partly reflect the influence of Liberty Media, whose chairman, John Malone, and chief executive, Mr. Maffei, are experienced at devising complex financial structures to highlight the value of businesses. Mr. Maffei and another Liberty executive are on Barnes & Noble's board.

"This is classic Malone," noted a Maxim Group analyst.

The idea came up during the company's long-running strategic-review process, which began in the summer of 2010, according to people familiar with the situation. Barnes & Noble executives and the board discussed how the company could increase shareholder value and improve its stock price, these people said, and separating the Nook business was one suggestion.

The idea was also embraced by Liberty, said another person familiar with the situation.

Barnes & Noble said the decision to explore the potential sale of the Nook business was a board-level decision that had the full support of the company.

Investors have shown they are in favor of companies overhauling their structures to focus their business divisions, applauding moves by McGraw-Hill Cos., Kraft Foods and other companies that separated businesses last year.

Barnes & Noble investors may not have the patience to fund Nook growth here and abroad, said a Forrester Research analyst. "It's going to require sustained investment."

Amazon Expands in Bulk With Diapers, Soap Deal

The Wall Street Journal

In a deal that underscores the growing competition to capture a consumer shift toward buying bulk items online, Amazon.com Inc. is poised to acquire Quidsi Inc., the parent company of Diapers.com and Soap.com, according to a person familiar with the matter.

The parties could announce the deal as early as Monday.

Amazon, the largest online-only retailer in the U.S., is expected to pay about $500 million in cash and assume $45 million in debt and other liabilities, this person said.

The management of Quidsi will remain with Amazon, the person added.

Representatives for both companies didn't immediately respond to requests for comment.

The deal was earlier reported on Fortune magazine's website.

Seattle-based Amazon, which has experienced sharp growth in recent years amid the online shift in consumer-shopping habits, has used acquisitions to increase its presence in certain categories. Last year, Amazon acquired online shoe and apparel retailer Zappos for $1.1 billion, Amazon's biggest buy to date.

Amazon's planned purchase of Jersey City, N.J.-based Quidsi shows hope for the business of selling consumer staples online. While household basics such as cleaning supplies, shampoo and paper goods are still a small slice of online sales, they are growing fast.

Last year, household-product sales over the Internet reached about $10 billion, up from $4 billion in 2003, according to estimates by market-research firm Nielsen Co. That compares with an estimated $361 billion in overall online sales in 2009.

Online shopping for household goods has been held back by the cost of shipping bulky but low-value items, like paper towels and laundry detergent, and the prevalence of bricks-and-mortar stores that sell the products for about the same price.

Yet Quidsi's fast-growing Diapers.com, launched in 2005, helped show there could be a market for selling household products for kids by pairing a wide selection and fast, free shipping with an efficient warehouse-distribution system. Earlier in the year, Quidsi expanded into other packaged goods by launching Soap.com as its second site.

The company previously said it brought in $180 million in revenue last year, and expects to bring in $300 million this year.

For Amazon, hooking shoppers on buying frequently used, everyday staples brings in repeat visitors that could also buy higher-margin goods. In September, Amazon launched a program that offered free two-day shipping for new parents for three months or more.

Amazon has also priced diapers aggressively; on Sunday, a package of 252 Pampers Baby Dry diapers cost $40.99 on Amazon.com, and $44.99 on Diapers.com.

Major consumer-product companies are accelerating their online investments because it provides direct access to consumer data, a gold mine that has long been controlled by retailers.

As retailers during the recession aggressively developed and promoted their own private-label products that compete with brand names, getting first-hand information about shopping habits has become even more important to manufacturers.

Procter & Gamble Co., the world's biggest consumer-products maker, earlier this year launched an online store that sells its major brands. P&G says the site is intended as a way to study consumers' online-buying habits rather than a significant source of sales growth. P&G garners only a fraction of its $79 billion in annual revenue from online sales.

Costly Sales Growth for Amazon

The Wall Street Journal

 

Amazon.com Inc. posted a 16% profit increase as sales continued at breakneck pace, but the Internet retailing giant also showed that it is spending heavily to expand its business.

Meanwhile, the company predicted strong growth for the current quarter, which includes the key holiday shopping season.

The Seattle company will this year open 13 new distribution centers, bringing its total to 52, said its chief financial officer, Tom Szkutak.

The company has also been offering trials of its Prime free-shipping loyalty program to more groups, including new parents and college students.

The expansion is coming at a cost for the e-commerce giant, which saw operating expenses rise 40% in the third quarter from a year earlier, continuing a trend seen in the second quarter.

"This is because of the growth we're seeing in our retail business and our Fulfillment By Amazon business," Mr. Szkutak said, referring to a program where Amazon houses and ships goods for smaller merchants.

Amazon's third-quarter results were driven by a 39% increase in sales to $7.56 billion. Most of the growth came from the company's catch-all electronics and general merchandise category, which increased sales by 68%.

Overall, income for the third quarter was $231 million, or 51 cents a share, compared with $199 million, or 45 cents a share, in the third quarter 2009.

Amazon offered no new details on sales of its Kindle e-reader or sales of digital books. In August, Amazon began shipping new versions of the Kindle, including an entry-level model that retails for $139, its lowest price yet.

The investments spooked some investors. Amazon's shares, which have been trading near all-time highs in recent weeks, fell 3.8% in after-hours trading to $158.65 after trading up 4% to $164.97 at 4 p.m. on the Nasdaq Stock Market.

Some analysts applauded the spending.

"Amazon has been trying to build their fulfillment system in advance of the holidays," said Scott Tilghman, an analyst with Hudson Square Research.

That spending is worthwhile because "Amazon has a pretty sticky customer base," he said. "You get somebody hooked and they love coming back, and you have nice long-term revenue stream."

Amazon also forecast a robust holiday quarter, when U.S. retail is typically at its peak. Amazon said its sales for the current quarter would increase 26% to 40% to between $12 billion and $13.3 billion from a year earlier.

But expenses will rise as well. The company gave a range for operating income that showed it could drop as much as 24% or climb as much as 18% from a year ago.

"Amazon is clearly investing for future growth and sacrificing margins to do that. But the guidance for fourth-quarter revenue implies staggering growth," said Jordan Rohan, an analyst at Stifel, Nicolaus & Co. "Amazon appears to be winding up to deliver the knock-out punch to everybody else in e-commerce," he said.

Research firm eMarketer predicts that U.S. e-commerce sales as a whole will increase 14% in the fourth quarter to $51 billion from a year earlier.

Already e-commerce sales growth is far outpacing the rest of U.S. retail, with the National Retail Federation forecasting U.S. sales across all channels in November and December will increase just 2.3% this year to $447.1 billion.

Amazon Selling More E-Books Than Paper Books

Brighthand

After years of anemic sales, e-books are starting to take off. As evidence: for the first time ever, Christmas Day shoppers on Amazon.com bought more books for their Kindles than they did regular books.

Obviously, this was an unusual situation -- Christmas Day isn't typically a big day for shopping, but virtually everyone who received a new Kindle e-book reader as a gift that day needed to download at least one book to try out their new device.

An E-book Milestone
The e-book has been around for years, but until recently there were questions about whether it would ever become a main-stream product. That changed with the success of the Amazon Kindle, which allows users to wirelessly purchase books from almost everywhere, and then read them on a device with a good screen and long battery life.

This retailer says the Kindle is "the most gifted item in Amazon's history".

With the success of Amazon's e-book reader -- which is on its second generation -- Barnes and Noble entered the market late this year with the nook.

More about the Kindle
The Amazon Kindle 2 debuted earlier this year. It has a 6-inch, 600-by-800-pixel e-Ink display that offers 16 shades of gray.

This device also sports 2 GB of memory, allowing it to hold more than 1,500 books.

The Kindle Store now includes over 390,000 books, including New York Times Bestsellers and New Releases.

Wal-Mart's Web War With Amazon

from the Wall Street Journal

The world's largest retailer has sparked a price war with Amazon in books and DVDs, two of the Internet company's strong suits. While only a few items are being discounted deeply so far, both companies appear to be selling some products at a loss.

Yet even if the scope of discounts expands to more products, the battle is unlikely to cause Wal-Mart much pain. Online sales account for less than 1% of Wal-Mart's U.S. revenue, according to J.P. Morgan analyst Chuck Grom.

And the Census Bureau says U.S. e-commerce sales totaled $134 billion in 2008, accounting for 3.3% of total retail sales. That entire market is dwarfed by sales of U.S. Wal-Mart stores alone, which totaled $256 billion last year.

With online purchases of everything from clothing to green lawn mowers growing in popularity, one interpretation is that Wal-Mart is trying to defend the rest of its turf. Electronics, for instance, are important for Wal-Mart's brick-and-mortar business while also being a big growth area for Amazon. But there is little sign of pressure on Wal-Mart to move more discount Dell notebooks. In fact, it increased its share of the flat-panel television market to 14.6% from 12.1% over the past twelve months, according to research firm Traqline, while Amazon's fell to 2.7% from 3.1%. In general, Wal-Mart sales of household durables dwarfs those of Amazon, and with Christmas coming, expect that trend to continue as they outsell on storage units and Christmas tree bags.

Amazon remains a long way from being a real threat to Wal-Mart movement of giant chess sets and, given its pure online focus, has the most to lose from any price skirmish. Its bigger rival will hardly notice the margin compression from heavy discounting in its tiny online business of ironing centers. Wal-Mart should come away from any cyber-showdowns with, at the very least, a publicity boost for its mainstay business.

Amazon Drops Price of Kindle

From PC Mag

Amazon launched its Kindle e-reader on a worldwide basis on Wednesday, discounting the price of the basic version by $40 for U.S customers.

The basic version of the Kindle is now priced at $249 in the U.S. Amazon said it launched the international version of the Kindle, complete with international wireless service, at $279. Amazon left the price of the larger Kindle DX unchanged; an international version of the Kindle DX will be launched in 2010, according to the U.K.'s Mirror.

The international version of the Kindle, of which there will be just one, will be launched in over 100 countries, including China and most of Europe, on Oct. 19.

Internationally, the device uses AT&T's 3G wireless service, instead of Sprint's service within the U.S. E In this case, however, AT&T contracts with local carriers to let the Kindle roam. However, neither Amazon nor AT&T will charge its customers fees for the privilege.

"With this new Kindle, you can get your books, newspapers or magazines delivered wirelessly whether home or abroad in over 100 countries," Amazon chief executive Jeff Bezos said in a note to customers. "Whether you're in Paris, Mumbai, or Sao Paolo, you can think of a book and be reading it in less than 60 seconds."

Bezos told Reuters that he was not "in principle" against making the works available on rival devices like Sony's own e-reader, but was focused on platforms with "large installed bases."

Bezos claimed that the Kindle was the most "wished for," gifted, and the highest-selling product across all of Amazon.com.

Amazon Faces Suit Over Kindle Device
As Originally Posted to The Wall Street Journal









Cable programmer Discovery Communications Inc. filed a lawsuit Tuesday against Amazon.com Inc., claiming Discovery owns a patent to technology used in Amazon's Kindle electronic-book reader.

The suit, filed in U.S. District Court in Delaware, cites a patent to an encryption system for e-books and asks for triple damages as well as a "continuing royalty" on the system.

The popularity of the Kindle, which allows users to download books, contributed to Discovery's decision to bring suit against Amazon rather than against the makers of other e-book readers, such as Sony Corp., people close to Discovery said.

"The Kindle and Kindle 2 are important and popular content delivery systems," Joseph A. LaSala Jr., Discovery's general counsel, said in a statement. "We believe they infringe our intellectual property rights, and that we are entitled to fair compensation."

Amazon declined to comment on the lawsuit. Sony declined to comment on the suit but said that in general it wants its e-book device to be an open platform. Right now, it supports a variety of formats.

The Kindle, released in 2007, is just the latest piece of mobile technology to be the subject of a patent dispute in recent years. "The courts are, as always, trying to keep up with the rapid change in technology. There are a lot of disputes now about what is even patentable," said Edward Reines, an intellectual-property litigator at the law firm Weil, Gotshal & Manges LLP.

The patent named in Discovery's suit, for an "electronic book security and copyright protection system," was filed in 1999 and awarded to Discovery in 2007, according to online records from the U.S. Patent and Trade Office.

In the 1990s, Discovery founder John Hendricks led research at his company into digital delivery of television and book content, filing for several patents in those areas, according to patent-office records. In 2004, the company sold about 20 patents relating to TV to a consortium of cable operators, according to people close to Discovery.

Amazon spent three years developing the Kindle. Part of the Kindle's initial edge over competitors has been its connection, via cellular data network, to the Amazon bookstore, enabling users to browse and buy books directly from the Kindle rather than from a regular computer.

Amazon has been protective of its proprietary e-book format. Last week, the company asked a Web site to take down instructions on how to run a program that could enable a Kindle device to display books from other e-book providers.

Amazon Cuts Sales Outlook, Sparking Stock Plunge

Amazon.com Inc. reported a 48% increase in profit and a 31% revenue jump for the third quarter, but issued a cautious projection ahead of the key holiday season.

The revised sales outlook comes just three months after the Seattle-based Internet retailer had raised its revenue forecast for the year, showing how quickly the consumer spending environment has declined. Amazon shares fell more than 13% after hours on the news.

Amazon is an important barometer for consumer spending because it sells everything from books to baby products; its fourth-quarter sales are typically its busiest due to the Christmas shopping season.

Other Internet and consumer technology companies have similarly given conservative or vague financial projections. On Tuesday, Apple Inc. forecast an unusually wide range for its fourth quarter, reflecting its uncertainty. Yahoo Inc. reduced its annual guidance. Last week, eBay Inc. also cut its full-year outlook.

Amazon's chief financial officer, Tom Szkutak, called the overall environment "relatively challenging" and said the company's lowered guidance was conservative. Amazon now expects full-year sales of $18.46 billion to $19.46 billion, down from its previous forecasted range of $19.35 billion to $20.1 billion.

For the current quarter, Amazon said sales would rise between 6% and 23% from a year ago -- or between $6 billion and $7 billion.

The forecast sent Amazon's shares tumbling $6.78 in after-hours trading to $43.21, after closing in 4 p.m. Nasdaq Stock Market trading at $49.99.

Jeff Bezos, Amazon's chief executive, said on a conference call the company is "well positioned" because it worked to be a "low-cost provider" and offers free shipping.

Still, he noted that "all companies have limited visibility right now" and added that Amazon has recently seen deceleration in demand for items priced above $1,000. Amazon will be "especially prudent" in how it makes new investments, he added.

According to a Forrester Research Inc. study released Wednesday, U.S. online retail sales this holiday season will reach $44 billion, up 12% over last year and the slowest growth rate to date.

Still, the study, which was based on two surveys conducted in September and October with 3,195 respondents, found that U.S. consumers still believe the Web can save them money, which could benefit Amazon.

In the study, 48% of respondents said they believed the best deals and prices can be found online, compared with 41% last year. The study also noted that 36% of consumers said higher gas prices would make it more likely that they would shop online, among other findings.

In the third quarter, Amazon's businesses posted growth even in the face of a cautious consumer-spending environment. Sales of books, music and movies grew 19% to $2.49 billion. Its electronics and other general merchandise business rose 52% to $1.64 billion. North American sales, which cover the company's U.S. and Canadian sites, increased 29% to $2.3 billion.

The company said revenue from its Amazon Prime membership, which gives shoppers free shipping in exchange for a yearly fee, jumped 12% to $191 million from $171 a year ago.

Mr. Bezos said in a statement that Amazon's global shipping programs had saved customers more than $700 million over the past 12 months, and he expects more consumers to take advantage of the program during the holiday season.

Amazon's increased selection of goods, attractive pricing and free-shipping programs all helped lure shoppers to the site, said Tim Boyd, an analyst with American Technology Research Inc. Amazon is also increasing its offerings by adding more small- and medium-sized merchants.

Amazon also gave an update on its much-hyped Kindle digital reading device, in which it has invested heavily to spur new growth. The company didn't disclose how many Kindles it has sold, but said Kindle titles now account for more than 10% of unit sales for available books, both print and digital.

The company said book titles for the Kindle have more than doubled since the device's launch last year to over 185,000, all priced around $10 or less. The store also added digital versions of periodicals such as the Financial Times and Los Angeles Times to its selection.

For the three months ended Sept. 30, Amazon's net income was $118 million, or 27 cents a share, compared with $80 million, or 19 cents a share, a year earlier. Net income included a $15 million benefit related to currency. Analysts had expected earnings of 25 cents, according to Thomson Reuters.

Revenue rose to $4.26 billion from $3.26 billion a year earlier, thanks in part to an $80 million boost from favorable foreign exchange rates.