The third generation of Amazon.com’s (NASDAQ: AMZN) Kindle e-reader was the best selling product in the e-commerce firm’s history. The announcement was confused with a number of pieces of data which did not quite fit together.
The corporation said in a press release that “Amazon.com today announced that the third-generation Kindle is now the bestselling product in Amazon’s history, eclipsing ‘Harry Potter and the Deathly Hallows (Book 7).'”
Jeff Bezos, Amazon.com founder and CEO reported that “We’re seeing that many of the people who are buying Kindles also own an LCD tablet.” That is supposed to be a hint that the Apple’s (NASDAQ: AAPL) iPad has not overwhelmed Kindle sales. Bezos did not refer to any specific sales levels for tablets, so his comment is meaningless.
Amazon also pointed out that “On Christmas Day, more people turned on new Kindles for the first time, downloaded more Kindle Buy Once, Read Everywhere apps, and purchased more Kindle books than on any other day in history.”
The media has made a great deal of the fact that Amazon gave no details about the actual number of Kindles sold. That leaves investors to wonder whether Amazon has really been successful in the e-reader market. Amazon might make the case the if it released a specific number then its competitors could use the information against it. It is very hard to make a case about why that is true.
Amazon also failed to tell whether the Kindle is profitable. The lowest priced version costs $139. The bill of materials is not much less than that according to some analysts. The cost of shipping and marketing must be added to the expenses of the e-reader. There is some speculation that Amazon loses money on the Kindle and makes its money on the sales of e-books from its 750,000 title library. That would make record Kindle sales a mixed blessing.
Transparency has become a larger issue for public companies over the last few years. Investors want more details about how the public companies in which they invest do. There is still a reluctance among many companies to allow shareholders to see what hurts or improves margins. Amazon has turned itself into the best example of a corporation the will show a great deal, but tell nothing.
Douglas A. McIntyre
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