Amazon’s figures “massaged heavily” to lower tax bill

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Analysts get skeptical

Amazon may have posted razor thin margins and warned of a troublesome third quarter, but according to analysts things “all may not be as they seem”.

Clive Longbottom, a senior analyst at Quocirca, said that the figures could also have been  “massaged heavily to lower Amazon’s tax bill.”

Despite the online retailer hitting higher sales then many technology companies, the company said it had seen a 96 percent drop in its second-quarter net income, which fell to $7 million in this quarter.

It pointed out however, that the drop included $65 million of net loss related to the acquisition and integration of Kiva Systems – a maker of robots used in warehouses.

Operating income was $107 million in the second quarter, compared with $201 million in second quarter 2011, which the company put down to “changes” in foreign exchange rates.

Tom Szkutak, Amazon’s chief financial officer, told the Wall Street Journal: “We’re investing a lot because of the opportunities we see.

“We’re going to continue to do that.”

He said Amazon had opened six new distribution centres and planned another 12 later this year.

However, Mr Longbottom pointed out that Amazon’s figures were likely to be more positive than they were made to sound.

“As always with these sort of things, all may not be as it seems,” he told ChannelBiz.

“Revenues are up well in both main activities – retail up by 25 percent, AWS by 57 percent.  Gross margin has improved from 24.1 percent  to 26.1 percent.  These show a solid underlying performance.

“So, how has its headline figure of profit dropped 96 percent?  Amazon has written down its investment in Kiva Systems by $65m, and has managed to write in a currency adjusted loss of $272 million.

“Therefore, “special circumstances” mean that the profit quoted is out by $337 million.”

He said if this was compared like-for-like with the equivalent quarter last year, this wass up from $191 million.

“The future statements included a lot of investment in new warehouses and infrastructure (amazing how a web-only business needs so much brick and mortar), so again, the underlying performance will have to be carefully looked at when the next set of figures come through,” he added.

“Wall Street was cautiously optimistic – the after hours stock price went up a couple of dollars.

“All told, I think it’s a pretty solid set of figures – massaged heavily to lower Amazon’s tax bill.”

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