Amazon sales rise, but profit comes up short

NEW YORK (CNNMoney) -- Amazon's stock fell 5.7% in after-hours trading Tuesday after the company reported first-quarter earnings that fell by one-third compared to a year earlier -- and sharply missed Wall Street forecasts.

After the bell Tuesday, Amazon (AMZN, Fortune 500) reported that its net income in the first quarter fell to $201 million, or 44 cents a share, compared to last year's $299 million. Analysts polled by Thomson Reuters were looking for earnings of 61 cents a share.

Amazon's sales during the quarter rose 38% to $9.9 billion, beating analysts' estimates of $9.5 billion.

Shares fell nearly 6% after hours as investors were rattled by the earnings miss, but they had recovered a bit, to a 2% loss, by 6 pm. ET. Amazon shares have been sluggish in 2011, rising only 1.3% year-to-date as of Tuesday's close, even as the broader market has rallied.

Investors also looked to a partially downbeat forecast for the second quarter. Amazon expects sales of $8.9 billion to $9.7 billion, but it expects its operating income to decline.

Amazon set a wide range for its operating income forecast, predicting that it will make between $95 million and $245 million -- which would be a drop of 9% to 65%, compared with the year-ago period.

On a post-earnings conference call with analysts, chief financial officer Tom Szkutak said the earthquake in Japan reduced international revenue by 5%, to a total of 27%.

"Growth rates have picked up, but they're not back to levels we saw before the event," Szkutak said.

He also noted that Amazon may build more order fulfillment centers than the nine it previously announced, thanks to "tremendous growth."

The company didn't talk much in its earnings release about the issues that crunched its profit. Instead, it highlighted its recent product releases.

A gray Cloud: However, one of those new products is linked to a recent kerfuffle for Amazon. In late March the company unveiled Cloud Drive, an Internet service that lets customers store music and other digital files on the company's servers and access them on computers, smartphones and other devices.

But just a few days ago, Amazon's cloud service suffered a major outage, downing websites it hosts -- including Reddit and Quora. Amazon hasn't yet said what caused the cascade of problems kicked off by an early-Thursday "networking event."

In a series of running updates on its Web services "Health Dashboard," Amazon wrote on Monday afternoon that it had completed its recovery efforts related to the outage -- but "a small number of volumes will not be fully recoverable."

That's a major problem for Amazon, which has touted its indomitable infrastructure. Customers who lost data will be even more unhappy.

Szkutak brushed off an analyst's question about the cloud outage, saying only that "the team is working very deliberately on the way they identify and validate the root causes of this incident. I don't really have a lot to add at this time."

Amazon doesn't break out its cloud services revenue. It's a small but growing part of its business: non-retail sales, the line item that includes Amazon's cloud hosting revenue, generated $311 last quarter. That's a drop in the bucket compared to Amazon's $9.9 billion in total revenue, but it marks a big jump from $188 million a year ago.

Still mum on Kindle: One of the new products Amazon touted in its earnings release is the "Kindle with Special Offers" unveiled earlier this month. The ad-supported e-reader sells for $114, which is $25 less than its ad-free counterpart, Amazon's $139 Kindle Wi-Fi.

Amazon has never revealed sales figures for the Kindle, which competes with other dedicated e-readers including the Barnes & Noble (BKS, Fortune 500) Nook, the Sony (SNE) Reader and Kobo from Borders (BGP), as well as Apple's (AAPL, Fortune 500) multipurpose iPad.

"We've seen device growth from both a profit and unit standpoint," Szkutak said in response to an analyst question about Kindle sales. "We're very, very happy to see the progress we've made. "