Amazon suffers 96 per cent drop in Q2 profits

$775m acquisition of Kiva is key contributing factor

Amazon's Q2 profits collapsed by 96 per cent drop compared to the same period last year, partly due ot its $775m (£493m) acquisition of robot technology company Kiva.

The world's largest e-commerce company made of profit of $191m (£122m) in the second quarter of 2011, but only $7m (£4.4m) in Q2 this year. It said that this quarter included $65m (£41.3m) of estimated net loss related to the acquisition and integration of Kiva Systems.

Amazon said net sales increased by 29 per cent year on year to $12.83bn (£8.2bn), owing much to the Kindle Fire, which it says remains its bestselling product on Amazon.com since launch.

Its operating income was $107m (£68.1m) compared with $201m (£127.9m) in Q2 2011.

"An unfavourable impact from year over year changes in foreign exchange rates throughout the quarter on operating income was $8m (£5.09m)," said Amazon.

The company's product revenue grew 25 per cent to $10.79bn (£6.87bn) from $8.6bn (£5.47bn) in Q2 2011, while its services revenue, which includes income from Amazon Web Services, grew from $1.3bn (£827m) in Q2 2011 to $2.04bn (£1.29bn) in Q2 2012.

In a conference call, Amazon CFO Tom Szkutak told analysts that the company was excited about "both the hardware and the content of the business" as it looks to compete with Apple and Google in the tablet market with the Kindle Fire, which is yet to be released in the UK.

In its third quarter forecast, Amazon said that net sales were expected to be between $12.9bn (£8.2bn) and $14.3bn (£9.09bn).