Amazon.com beats Street, may see blow-out holiday

SAN FRANCISCO (Reuters) - Amazon.com Inc on posted quarterly profit that handily beat Wall Street estimates and said holiday sales could come in far above expectations, sending shares in the world's largest online retailer up nearly 13 percent.

The company also sang the praises of its Kindle electronic reader, saying it was its top selling item in both unit sales and dollars across all of its product categories.

"It's a strong September quarter," said Colin Gillis of Brigantine Advisors. "They beat on the top and they beat on the bottom ... investors are going to be heartened that consumers are still spending."

Amazon's net profit in its third quarter was $199 million, or 45 cents per share, from $118 million, or 27 cents per share, a year earlier.

Analysts, on average, had been expecting earnings of 33 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 28 percent to $5.45 billion, the Seattle-based company said, compared to the Wall Street average estimate of $5.03 billion.

Wall Street expectations for Amazon have been high, with the retailer expected to outpace the market during the crucial holiday season. But, a recent price war with Wal-Mart Stores Inc over books sold online means that margins could be at risk in coming months.

For the key holiday fourth quarter, Amazon said it sees revenue to range between $8.125 billion and $9.125 billion, compared with analysts' expectations for $8.13 billion.

The company forecast operating profit between $300 million and $425 million.

"The problem with the guidance is, it is so wide you could drive a truck through it," said Gillis, adding Amazon had a history of providing a wide-ranging forecast.

E-READER CHALLENGE

Amazon has been rolling out new incentives to spur sales in advance of the holidays. To maintain its dominance in e-readers amid an onslaught of competing devices it cut the price of its Kindle to $259 from $299 and introduced a global version.

Still, Amazon's first-mover status and dominant position in the growing e-reader market has hit its first major challenge with the debut this week of Barnes & Noble's Nook. That device is priced the same as Amazon's and offers features some analysts say will take market share from the online retailer.

Amazon recently bought online shoe retailer Zappos.com to venture further into footwear and apparel, and it introduced same-day shipping in seven major U.S. cities for the products on its website.

In North America, sales rose 23 percent in the quarter, while internationally sales grew 33 percent, the company said.

Media sales, which had shown slowing growth in the previous quarter, rose a healthy 13 percent in North America. They had risen a mere 1 percent in the second quarter.

Shares -- which are up 82 percent since January -- rose nearly 13 percent to $105.25 in after-hours trade.

(Reporting by Alexandria Sage, editing by Leslie Gevirtz)

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