Amazon Q1 sales up, net income down, as marketing expenses balloon

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Amazon.com net sales increased 38% year-over-year to $9.86 billion in the first quarter of 2011, the company said April 26 in an earnings report. However, net income decreased 33% to $201 million in the quarter, compared with the prior year, as marketing expenses increased by $126 million.

Operating income also decreased, falling 18.3% to $322 million in the three-month period ending March 31. Marketing expenses for Q1 2011 increased 62.7% to $327 million for the Seattle, Wash.-based e-commerce company.

“The two primary paid marketing [outlets] are our associates network and sponsored search,” said Thomas Szkutak, CFO and SVP of Amazon, on an earnings call. “We are doing some more broad advertising related to the Kindle.”

North American segment sales, representing the company's US and Canadian sites, increased 45% to $5.47 billion compared with the first quarter of 2010.

Worldwide media sales grew 15% to $3.96 billion. Worldwide electronics and other general merchandise sales grew 59% to $5.59 billion in the quarter, compared with the prior year.

Jeff Bezos, Amazon's founder and CEO, did not speak during the earnings call.

Amazon's in-the-cloud services crashed for about four days from April 21 to April 25. First-quarter earnings were not affected by the issue, however, as the quarter ended March 31.

Net income in Q4 2010 improved by 8% to $416 million, compared with Q4 of 2009, while operating income dropped 2.5% to $494 million. Improved Q4 earnings were largely attributed to a successful holiday season.

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