Amazon.com to report 3rd-qtr results following Zappos purchase announcement, Kindle price cut

Earnings Preview: Amazon seen posting solid 3Q

SAN FRANCISCO — Amazon.com Inc. reports its earnings for the third quarter on Thursday. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: In the third quarter, the Seattle-based online retailer said it would buy privately held online shoe store Zappos.com Inc.

Amazon said in July that it agreed to buy Zappos in a deal worth about $850 million — Amazon’s biggest acquisition so far. Under the deal’s terms Amazon, will pay Zappos with about 10 million shares of stock, along with $40 million in cash and stock paid to Zappos employees. The deal is expected to close this fall.

Zappos, which sells shoes, apparel and accessories, was founded in 1999 and offers free shipping in four or five business days on all orders. The company also pays for return shipping. Amazon has run its own online shoe and handbag store since 2007, Endless.com.

Zappos, which had about $635 million in revenue last year, will continue to operate out of its Las Vegas headquarters.

The third quarter is also the first full quarter to reflect sales of both the Kindle, Amazon’s e-reader, and Kindle DX, a model with a larger screen geared more toward reading textbooks and periodicals. Both can wirelessly download content like books and newspapers.

Amazon cut the price of the Kindle to $299 from $359 in July, hoping to spur sales. The price was further cut to $259 after the quarter ended, at which time Amazon also unveiled a $279 international version of the device.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect third-quarter earnings of 33 cents per share on $5.03 billion in revenue.

ANALYST TAKE: In a recent client note, Brigantine Advisors analyst Colin Gillis predicted “solid” quarterly results, saying the company may beat his earnings estimate of 31 cents per share.

He cautioned that consumers’ growing interest in nonphysical products — such as digital downloads of movies and music — puts Amazon in a vulnerable position, and he’ll be keeping an eye out to see if the company’s media segment sees sequential growth for the first time this year.

WHAT’S AHEAD: With the October price cut to the Kindle and release of an international model that can wirelessly download content in 100 countries, it’s clear that Amazon is hoping to convince more consumers to adopt the e-reader while staying ahead of an ever-expanding field of competitors.

Amazon is also locked in a book-selling price skirmish with the Web sites for Target Corp. and Wal-Mart Stores Inc. All three have recently began offering some books that are expected to be best sellers for $8.99 apiece — much lower than the titles’ regular costs.

STOCK PERFORMANCE: Amazon shares finished the quarter up nearly 12 percent, closing at $93.36 on Sept. 30.