Amazon's stock slumps on lower earnings - but the future looks bright

Amazon.com last night announced that their net profit dropped in its crucial holiday quarter as shipping and technology costs rose and revenue fell shy of Wall Street expectations, sending their shares down more than 10%.

4th quarter net income was $199 million, compared with $346.7 million, in the year-ago period. Sales rose 17% to $2.98 billion from $2.54 billion a year earlier, missing analysts' targets of $3.08 billion.

There are lots of good reasons for Amazons earnings and revenues being lower than expected, including shipping promotions and a higher propensity of goods sold by Amazon partner sites rather than by Amazon themselves.

But it seems the real issue is that Jeff Bezos and his team believe that the Internet is going into a new phase which requires another chunk of investment in technology and new products.

For it looks like Amazon are not anly about to launch new features such as search and online ads, but they are also diving into major new product initiatives. The most exciting look to be a music store, a video-on-demand service and electronic books. Some even under the Amazon label.

So, like everyone else, Amazon believes that the future lies in downloadable digital products and the convergence of media and technology. So, why shouldn't Amazon become a publishing label? And maybe even a record label in the future.

For one day artists, writers and musicians may create their own products and sell them directly via online stores and marketplaces, leaving out the middlemen. If so, Amazon could be well placed to capitalise. They need to make the investments now. And they should pay off well in 2-3 years.