LOS ANGELES -- Shares for Amazon tumbled Thursday after the e-commerce giant Amazon.com posted a wider-than-expected $126 million loss for second quarter on revenues of $19.34 billion.
Amazon CEO Jeff Bezos didn't address the loss in the earnings release, instead talking about new ventures for Amazon.
"We continue working hard on making the Amazon customer experience better and better," he said Jeff Bezos.
However, it's spending spree as it expands into new businesses it clearly costing the company. In it's guidance for the upcoming 3rd quarter, Amazon said it expects to lose as much as $810 million--compared to a $25 million loss for the year ago third quarter.
Friday the online retail giant will expand into the cutthroat world of smartphones with its first attempt at a smartphone, Fire, joining a crowded market that includes Apple, Samsung Electronics and Microsoft.
Last week, it also launched an e-book subscription service, Kindle Unlimited, offering access to 600,000 e-books and audiobooks for $9.99 a month.
Critics were not kind, noting that most current fare is not included with the service. Reviews for the new Fire haven't been raves, either.
The mobile market is huge and continues to grow. This year the total mobile user base of smartphone users will reach 1.76 billion, according to researcher eMarketer. Some 50% of smartphone users will be on Android phones, the Google-owned operating system that Amazon uses for its smartphone and Kindle tablets.
Why Amazon looked to expand to the smartphone. Retail sales on smartphones this year in the United States will top $18.4 billion, up 25.4% from 2012, says researcher eMarketer.
The online retail market will surpass $304 billion in 2014, up from $262.3 billion in 2013, eMarketer says.
According to online finance tracker Trefis, Amazon has 20 million subscribers to its Prime two-day free shipping, and movie/TV and music listening and viewing service.
Amazon charges $99 yearly for the service, and revenues earned from Prime are just 2% of sales, with "much higher," margins, according toTrefis.
Additionally, Prime customers tend to buy twice as much as regular customers, which is why Amazon pushes Prime -- and has the new phone geared to Prime members.
The Fire phone sells for $199 with a two-year contract with AT&T, but purchasers get a free year of Prime with it.
Richard Doherty, an analyst with the Envisioneering Group market research firm, doesn't see Amazon discounting the Fire phone -- yet. "They will discount if it is not low in Inventory perhaps," he says. "As they did multiple times with the Fire tablet over many seasons."
Overall expectations for the Fire are low. "I believe it will be successful within Amazon's target audience but will not be a major hit with broad consumers," says analyst Tim Bajarin, of Creative Strategies.
First published July 24 2014, 1:50 PM