Assessing Amazon’s quarterly report: 783,000 Kindles sold to date

Amazon.com had a very good quarter, in spite of the continued great recession. The company reported operating cash flow of $1.88 billion, a 72 percent increase over the same quarter in 2008. Net sales were up 14 percent to $4.65 billion in the quarter, but income decreased by 27 percent because of unfavorable exchange rates (Amazon’s international sales were up 28 percent, when adjusted for the $30 million cost of foreign exchange increased only 14 percent) and several business events that cumulatively, added about $2 million in income. Here’s the earnings report PDF.

In short, Amazon sold a lot more at home and overseas, which increased its costs overall—its operating margin fell from 4.7 percent a year ago to 4.0 percent this past quarter. Even in the worst of times, Amazon sells more stuff, which is the good news. The bad news is only marginally so, because higher costs can be managed, and Amazon continues to find ways to eke out more profit.

But, here’s the question: How many Kindles were sold in the quarter? We know the Kindle DX was introduced and sold out in the quarter and that Kindle 2 was available for the entire quarter. Contrary to the earnings release statement that Amazon dropped the price of Kindle 2 to $299 during the second quarter, that didn’t happen until July, so all the Kindle 2s sold went out at $359.

I’ve previously estimated that the total number of all Kindle models sold was 754,000 as of July 1, 2009.

Amazon reported an increase in North American electronics and general merchandise revenue of $267 million compared to Q2, 2008—a 29 percent increase. Somewhere in there, amongst the increased sales of LCD TVs and other electronics, are the full revenues for Kindle, since it is only available in the US. Since international sales of electronics and general merchandise rose 41 percent (35 percent after adjusting for foreign exchange), we can assume that approximately three-fourths of the increase in North American electronics sales were in other categories than Kindle, following the international patterns. That leaves roughly $67 million in North American electronics and general merchandise sales that were probably Kindle-related.

If 20,000 Kindle DX sold before the stock was depleted, that would account for roughly $10M in new revenue. Assuming Kindle 2 is now selling at three times the daily rate Kindle did last fall, when orders ran between 600 and 700 a day, and going with the low-end number of 1,800 units per day, the Kindle 2 generated approximately 162,000 unit sales in Q2, for $58.3 million in revenue. Add it all up and we’re within $1.3 million of the revenue that we believe can be accounted for by Kindle.

That would make a total of 182,000 Kindles sold in Q2, 2009. So, they did slightly better than I expected when I last estimated sales. The total number of Kindles sold to date is approximately 783,000.

By way of comparison, Apple sells that many iPhones every two to three weeks. Kindle has not crossed the chasm, yet.

UPDATE: Reuters reports this was a “ho-hum quarter.” Shares gave up all the day’s gains and $1.20 more in after-hours trading (see right). Tightening margins in a recession are not cause for alarm; Amazon is picking up market share.