Don't Overlook Amazon's Web Services Business

Jan. 31, 2008 12:30 PM, Inc. (AMZN)2 Comments
Larry Dignan profile picture
Larry Dignan

Amazon’s (NASDAQ:AMZN) fourth quarter results had a little bit of everything for its various observers: Sales were impressive and the outlook wasn’t bad, but worries about profit margins are worrisome. But amid all the talk about consumer demand, growth abroad and adding third party sellers to Amazon’s platform the “other” line on the company’s breakdown of revenue is far more interesting.

Why focus on “other” revenue when the fourth quarter tally was a mere $111 million, up from $81 million a year ago? That other line, which includes Amazon’s Web services, is the future of Amazon. You won’t hear much about that grab bag of sales from Wall Streeters today (see Techmeme). Why would you? In the context of Amazon’s overall figures $111 million is a pimple on the back of an elephant. After all, Amazon reported fourth quarter net income of $207 million, or 48 cents a share, on revenue of $5.67 billion. For 2007, Amazon had sales of $14.84 billion and net income of $476 million, or $1.12 a share.

Amazon’s outlook wasn’t bad although the guidance did hint at lower profit margins and rattled Wall Street a bit. For the first quarter, Amazon is predicting net sales to be between $3.95 billion and $4.15 billion, up 31 percent to 38 percent from a year ago. Operating income is expected to be between $155 million and $220 million. For the 2008, Amazon is projecting sales to be between $18.75 billion and $19.75 billion with operating income between $785 million and $985 billion.

With those big numbers floating around it’s easy to overlook the “other” line. Don’t.

So what does this miscellaneous revenue line tell us? Amazon Web services are gaining some traction. Amazon CFO Thomas J. Szkutak said specifically that the other line includes Amazon’s Enterprise Solutions business. For 2007, Amazon’s other revenue

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Larry Dignan profile picture
Larry Dignan is executive editor of ZDNet news and blogs. Larry was most recently executive news editor at eWeek. Prior to that, he was news editor at Baseline, and also served as the East Coast news editor and finance editor at CNET Visit: Between The Lines (

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