Amazon.com Reports Full Year Up 39%

Amazon.com announced strong fourth quarter and full year results yesterday. Full year net sales increased 39% to $14.84 billion (35% excluding the $0.40 billion favorable impact from changes in foreign exchange) versus net sales of $10.71 billion in 2006. Full year operating income increased 69% to $655 million (61% excluding the $29 million favorable forex impact) versus operating income of $389 million in 2006. Net income increased 150% to $476 million in 2007, or $1.12 per diluted share, compared with net income of $190 million, or $0.45 per diluted share, in 2006. Press release

Other highlights from the press release included the following:

• The Company introduced Amazon Kindle, a revolutionary wireless portable reader that provides instant wireless downloads of more than 90,000 books, blogs, magazines and newspapers to a crisp, high-resolution electronic paper display. The Amazon Kindle team is scrambling to increase manufacturing, as demand remains higher than supply. Kindles are being delivered to customers on a first come, first served basis.
• Amazon MP3 added DRM-free music downloads from Sony BMG Music Entertainment and Warner Music Group, making it the only retailer to offer DRM-free MP3 music downloads from all four major music labels as well as over 50,000 independent labels. The MP3 store now includes over 3.4 million songs from more than 270,000 artists. Pepsi will debut the Pepsi Stuff Amazon MP3 promotion, a massive collect-and-get program, during the upcoming Super Bowl.
• Over 330,000 developers have registered to use Amazon Web Services (AWS), up more than 30,000 from last quarter.
• Adoption of Amazon Elastic Compute Cloud (EC2) and Amazon Simple Storage Service (S3) continues to grow. As an indicator of adoption, bandwidth utilized by these services in fourth quarter 2007 was even greater than bandwidth utilized in the same period by all of Amazon.com's global websites combined.
• AWS launched a limited beta of its SimpleDB Service, which allows queries to run on structured data in real time. This service works in conjunction with Amazon EC2 and Amazon S3, collectively providing the ability to store, process and query data sets in the cloud.
• AWS launched European storage for Amazon S3, allowing software developers and businesses to store their data physically in Europe. Amazon S3 is a storage service in the cloud offering software developers and businesses low-cost access to the same scalable and reliable storage infrastructure Amazon uses to run its own global network of websites.
• North America segment sales, representing the Company's U.S. and Canadian sites, were $3.08 billion, up 40% from fourth quarter 2006.
• International segment sales, representing the Company's U.K., German, Japanese, French and Chinese sites, were $2.59 billion, up 46% from fourth quarter 2006. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 35%.
• Worldwide Media sales grew 33% to $3.33 billion in fourth quarter 2007, compared with $2.50 billion in fourth quarter 2006.
• Worldwide Electronics & Other General Merchandise sales grew 58% to $2.21 billion in fourth quarter 2007, compared with $1.40 billion in fourth quarter 2006, and increased to 39% of worldwide net sales compared with 35%.
• A record number of customers took advantage of Amazon Prime, the Company's unlimited free-shipping program. Amazon Prime is now available in the U.K., Germany, Japan and the U.S.
• Amazon.com shipped over half-a-million units in fourth quarter 2007 on behalf of sellers who utilized the Fulfillment by Amazon service.

Notable comments from the conference call transcript (SeekingAlpha):

On their outlook:

For calendar 2008, we expect net sales of between $18.75 bllion and $19.75 billion, a growth of between 26% and 33%. This guidance anticipates greater than 200 basis points of positive impact from foreign exchange. GAAP operating income to be between $785 million and $985 million, or between 20% growth and 50% growth. This includes approximately $240 million for stock-based compensation and amortization of intangible assets. We anticipate 2008 consolidated segment operating income, which excludes stock-based compensation and other operating expense to be between $1.025 billion and $1.225 billion, or between 21% growth and 44% growth.

Some interesting comments on the Kindle from Bezos:

Well, the Kindle has a few experimental features that are -- some of which are visible on the Kindle. It has something call a Now-Now, where you can type in any question and using the Mechanical Turk in the background, which is one of our web services, that question gets answered and the answer to the question gets displayed on the Kindle. There is an experimental web browser on the Kindle, which is actually, for a mobile device, a pretty good web browser, and of course is has the Whisper Net EVDO connectivity, which gives you broadband wireless access to that web browser.
So there are a number of experimental features and we’ve put those on there and made them accessible to customers so that these early Kindle users can tell us what they think of those features, whether we should continue to invest in them, continue to work on them and make them part of the product.

And answering a question on Kindle demand:

Yeah, Kindle is, in terms of demand, is outpacing our expectations, which is certainly something that we are very grateful for. It’s also on the manufacturing side causing us to scramble. We’re working very hard to increase the number of units that we can build and supply per week, so that we can get back -- our goal is to get into a situation as quickly as we can where when you order a Kindle, we ship it immediately. That’s the standard we want to hold ourselves to and we are working very hard to get there. We are super-excited by the very strong demand.

Borders Australia

For those waiting for resolution of the review by the Australian Competition Commission, you will have to wait another week. No explanation given, although from the documentation on their web site it does look like they need more time to review additional material they have requested from A&R/Whitcoulls who are the likely purchasers. Feb 6th is now the expected date.

Executable ISBNs: Not As Dull As it Sounds

Exact Editions are doing some very cool things with magazines and they like to build technical solutions that solve interesting problems. They have been working with The Bookseller, and as a derivative of this work they came up with a way for ISBNs listed in some of The Bookseller publications to become executable. Why this is interesting is that the widget they have built effectively 'picks' up the ISBN of the static page and takes you to a web site which at this point is Google. (BTW, Exact Editions are using the same or similar tool to pick up things like phone numbers off the pages of the magazines in their e-Catalog).

The Bookseller produces a buyers guide which I liked so much we copied the whole thing for the US market when I was at Bowker. (Even down to the color coding). As a simple listing within subjects it always retained significant value for buyers. Enabling a user to click on an executable ISBN and create a list, learn more about the title, navigate to the publisher or a retailer makes this widget both really cool and really functional. And isn't that exactly what you want.

The application is still experimental and according to Adam Hodgkin at Exact Editions they showed The Bookseller staff the application and they liked it so much they put it up immediately; hence, they are likely to change how it works as they see how it is used. To see it click here and then go to the What's Hot nav bar and click on Buyers Guide. Chose one of the covers on the page. Once inside the guide, go to any pages and run your cursor over the page. Each ISBN will light up inside a green box. You are on your own from that point.

My thoughts expressed to Adam were as follows:

This bookseller thing is great. So easy. I think there should be a store front however instead of Google. I understand the agnosticism but if I am clicking on the isbn – effectively either looking for more information or wanting to buy – it could be an anti-climax getting steered to Google. What The Bookseller should do is build dynamic pages that once someone clicks on the Isbn they come to a retail outlet page where the user can see the book vended from four or five or six possible vendors. The Bookseller could sell each of these slots or storefronts. Perhaps also, the landing page could show more from that publisher which again would be potential ad sales
revenue for The Bookseller.

Booksellers and librarians who use these guides and who migrate their book browsing to the web will really enjoy using this application and it will be interesting to see how it evolves. The Exact Editions widget application could also be implemented at other publications - consumer magazines, newspapers, reviews publications for example - that will make it easier for consumers to create their own buy lists and shopping carts without having to scribble down titles or rip pages out of magazines.

Interestingly, the gap between The Bookseller site and Publisher's Weekly continues to grow to PW's disadvantage IMHO.

Haights Cross For Sale

Haights Cross, which went through a corporate recapitalization last year has announced that it is placing itself up for sale. From the press release on the company's web site:

Paul J. Crecca, HCC’s President and Chief Executive Officer, commented: “Upon the completion of our recapitalization in August 2007 and the constitution of our Board of Directors, we indicated we would evaluate all strategic alternatives, including the possible sale of all or substantially all of our assets. Throughout this process, the Haights Cross businesses and our committed employees have remained focused on providing customers with quality products and services, and thus strengthening their positions in the markets they serve. We believe that despite the current economic environment, these assets offer compelling value to prospective buyers.”

The company indicated that Evercore Partners would conduct the sale.

The Aussies aren't done with Beah

After last weeks rebuttal by Ishmael Beah regarding the points raised by The Australian newspaper, the journalists have come up with a point by point refutation of his argument. Essentially, they contend he still has not accounted for the fundamental inaccuracy in the book, and while the central element regarding his story is the length of time he served as a 'child soldier', other inaccuracies are also coming to light.

Commenting in their article The Australian says in part,

The Australian has believed that those inaccuracies were a result of Beah's memory being impaired by the trauma, drugs and extreme youth he describes in his book but the latest statement by Beah, who is now 27, and his publisher Sarah Crichton of Farrar, Straus & Giroux seriously misrepresent The Australian's reporting over the last week.

Beah is not going to change is story and perhaps there is a ready and acceptable notion in the minds of those familiar with the story that perhaps he suffered so much (and is a symbol of many other lost children) that we should therefore forgive some minor infraction. I was however, surprised at the view taken by Publisher's Weekly which effectively apologizes for every authors confusion with reality and fiction.

In this country, it's commonly known in the publishing industry that memoirs—even post–James Frey—are not stringently fact-checked; at most, they're submitted to legal departments looking for libel. Writers are responsible for their facts, and editors for probing their writers' hearts and souls and memories. In the case of A Long Way Gone, however, an excerpt (including the now-disputed dates) was fact-checked by the New York Times last January. “The fact-checking, as often happens, turned up a few discrepancies that were resolved without undermining the plausibility of his account,” Times spokesperson Diane C. McNulty said in an e-mail.

Apologizes but doesn't hold anyone accountable. PW goes on to say that in the memoir world no ones memory can be completely verified but in this case (and in countless others) just some basic fact checking might have raised a few flags. Note also, the incredible amounts paid for celebrity and political memoirs: Are we now to believe these might contain only a casual relationship to reality or are they true and close depictions of reality as the author knew it at the time. Possibly both. This book was sold as 'a truth' and in the pursuit of that truth it looks like anyone asking any pointed questions was patronized and rebuffed. Surely there are enough 'real' memoirs worth reading without embellishment and Long Way Gone is a case in point.

Hold on to your Sari

Reaction to the news that Mills & Boone are entering the Indian marketplace with a direct publishing operation could elicit a 'Duh!' especially, if you had any exposure to a Bollywood movie. Harlequin, owners of M&B has announced that they will be publishing locally produced romance titles in India later this year. The task looks slated for success on a number of fronts not least of which are the potential size of the Indian market and the veritable feast of potential story derivations. In fact, all they will need to do is copy the scripts of the 300 or so movies that are released each year and they will be on a winner.

From the TimesOnline:

“India is crazy about true romance,” Andrew Go, the head of the Indian operation, said. “Look at the basic Bollywood plot: boy meets girl; conflict; happy ending. We carry across that trend. We say we sell four books a second, Actually it’s 4.4. If I can take that to five, I’m a hero.”

India has the potential to hit Mr Go’s target: the popularity of the country’s lending libraries is declining as India’s burgeoning middle class opts to buy rather than borrow.

Interestingly, the expectation for success continues to rely on printed products. It will be interesting to see if Harlequin sees more rapid growth in their electronic products in this market where travel and access to products is still a challenge.

The company plans to follow formula similar to their developed markets which will include solicitation of local authors. They intend to offer some guideance to aspiring authors on the site. One thing they will change is to lower the hear somewhat which is unlikely to please Richard Gere.

For the Reader Who Has Everything

Tom Stoppard in the NYTimes this morning about his book satchel by T. Anthony. So, if you are wondering what to buy that avid reader, or if you are like Mr & Mrs. PND who, when travelling on vacation distribute their travel reading material across several suit cases, this is the gift for you. Unfortunately, T Anthony stopped making the book satchel many years ago and so you may be SOL. I quick check on Ebay this afternoon proved fruitless.

McGraw Hill Results

McGraw Hill reported their full year results on Thursday with revenues and net income up versus 2007. Revenues for 2007 of $6.8Billion were 8.3% higher versus 2006 and 2007 net income of $1.0billion was 14.9% higher versus 2006. Their stock price also got a kick on their more encouraging outlook for 2008. The company said they expect revenue growth in 2008 of 6% to 8% at McGraw-Hill Education and Information & Media, and a 2% to 4% increase at Financial Services. This exceeded analysts expectations.

Shares rose as much as 12.5 percent. Chief Executive Harold McGraw said he expects the U.S. economy and capital markets to show signs of recovery in the
second half of 2008, though a "housing recession" will likely persist all year. McGraw-Hill also publishes school textbooks and magazines such as BusinessWeek,
and owns researcher J.D. Power & Associates.

Despite these full year numbers, the company's results were significantly impacted by a slow fourth quarter - mainly due to the slow-down in credit market - and net income was almost half the level the company recorded in 2006. Revenues were off 1.5% versus 2006.

Other highlights from the press release:

Education: "Revenue for this segment in 2007 increased 7.2% to $2.7 billion compared to 2006. Operating profit in 2007 grew by 21.5% to $400 million. Included in the segment's 2007 operating profit is a pre-tax restructuring charge of $16.3 million in the fourth quarter for severance relating to a workforce reduction of 304 positions. In 2006, there were pre- tax restructuring charges of $5.6 million in the third quarter and $10.4 million in the fourth quarter.

Financial Services: "Revenue for this segment in 2007 increased by 10.9% to $3.0 billion compared to last year. Operating profit grew by 13.1% to $1.4 billion. Included in the segment's operating profit is a pre-tax gain of $17.3 million on the divestiture of a mutual fund data business in the first quarter and an $18.8 million pre-tax restructuring charge in the fourth quarter consisting mostly of severance relating to a workforce reduction of 172 positions, driven by the current business environment, as well as the consolidation of business support functions.

Information & Media: "Revenue for this segment in 2007 increased 3.6% to $1.0 billion compared to last year. Operating profit grew 27.2% to $63.5 million. Included in the segment's 2007 operating profit is a pre-tax restructuring charge of $6.7 million in the fourth quarter for severance relating to a workforce reduction of 114 positions. In 2006, there were pre- tax restructuring charges of $5.7 million in the third quarter and $3.0 million in the fourth quarter. The operating margin for 2007 was 6.2% versus 5.1% in 2006. Foreign exchange rates did not have a material effect on revenue, but reduced operating profit growth by $4.6 million.

Pearson Get Merger Clearance with Divestitures

Pearson received clearance from the US Justice department for the completion of their $950million acquisition of Harcourt Assessment which they purchased from Reed Elsevier. The court required that they divest a number of products which on the surface appear inconsequential to the entire deal. From PRnewswire:

"Without the divestitures obtained by the department, purchasers of clinical tests for adaptive behavior, speech and language, and adult abnormal personality likely would have faced higher prices and reduced innovation as a result of this transaction," said Thomas O. Barnett, assistant attorney general for antitrust, in a statement.

Under the terms of the proposed settlement, Pearson and Harcourt must divest: Harcourt's adaptive behavior clinical test, the Adaptive Behavior Assessment System; Harcourt's adult abnormal personality clinical test, the Emotional Assessment System, which is under development; and in the speech and language clinical test market, either Pearson's Comprehensive Assessment of Spoken Language and the Oral and Written Language Scales or Harcourt's Clinical Evaluation of Language Fundamentals. Under the proposed settlement, the Department's Antitrust Division must approve the buyer of each of the divested assets.

Given the breadth of the Harcourt and Pearson assessment offerings this resolution looks inconsequential; the subject areas are fairly narrow and specialized. Also, the release doesn't indicate whether Pearson is precluded from competing in these segments at some point in the future. There is likely to be any number of potential buyers - Reed Elsevier may buy them back, Wolters Kluwer may also be interested given their existing health titles.

A Marathon

My friend and one-time collaborator is running the London Marathon and is looking for sponsors. Here is his note:

After my 37 years in the business, I'm running the 2008 London Marathon for the UK book trade's welfare charity, BTBS. You can make a contribution at http://www.justgiving.com/michaelholdsworth [or see below if you don't like using a card online.] Since I did my last Marathon aged 50 (and before that, at age 40), 2008 - at 60 - is appropriate, I guess. As you will know, BTBS is a very small charity and every little bit helps proportionately much more!Best as ever - and thanks in advance for anything you care to contribute. Michael

So as my mother in law would say 'take the rubber-band off your wallet' and give him and the charity some help. If nothing else wish him well. Last year it was very hot.

Shared Book And Random House

In what I expect with be the first of many similar relationships, SharedBook has formed an alliance with Random House to create personalized versions of Children's books. The Pokey Little Puppy will be the first title in this new venture.

Utilizing SharedBook's Reverse Publishing Platform, consumers can now create a unique, personalized version of The Poky Little Puppy by using an online book-making template. Consumers can create their own version of The Poky Little Puppy complete with a custom dedication and also upload a personal photo to the front of the book. The book is then purchased and sent to the printer for on-demand output in laminated hardcover format.

I saw a sample of this product several weeks ago and other than the personalization the book is indistinguishable from a book found on the shelves of any bookstore. The binding, boards, ink and color qualities are all of a high level as you would expect from a product from Random House.

The price for a unique, personalized edition of The Poky Little Puppy is $25 in laminated hardcover format, which includes standard domestic shipping. Completed books arrive in 10-14 business days. Expedited shipping options are available for an additional charge.

I interviewed Caroline Vanderlip, CEO of SharedBook a few months ago and here is her interview.

Beah Strongly Denies Any "Poetic License"

Ishmael Beah strongly denies any of the assertions raised in The Weekend Australian's about the accuracy of his memoir/autobio A Long Way Gone. Here is the text of his statement released yesterday on his website.

FARRAR STRAUS AND GIROUX, BOOK PUBLISHERS
19 Union Square West
New York,
NY 10003
January 22, 2008
For immediate release

For months I told Bob Lloyd and The Australian’s reporter, Shelley Gare, through my publisher, my agent, and my adoptive mother, that unfortunately they were wrong, that the man they claimed was my father was not my father, and that my mother and brothers were not alive, as Lloyd claimed. Last week, when The Australian sent reporters to my home in Sierra Leone, they were forced to cknowledge that this has been a hoax.

Now The Australian’s reporters are trying to raise questions about the dates in my book, A Long Way Gone, regarding when the war came to my village. They offer as "proof" a man named Mr. Barry who claims to have been the head of the school I attended when I was young. I have never heard of a Mr. Barry. The principal of my school was Mr. Sidiki Brahima.

The war in Sierra Leone began in 1991. My story, as I remember it and wrote it, began in 1993 when rebels “attacked the mining areas” (my words from the book) in my village while I was away with friends. I never saw my family again. The Australian, presumably, is basing their defamation of me on reports that the Sierra Rutile Mine was closed down by rebels in 1995. But there were rebels in my region, my village, and my life in 1993. They attacked throughout 1993 and 1994 before closing down the mine.

Others from Sierra Leone can bear witness to the truth of my story.

Leslie Mboka, National Chairman of the Campaign for Just Mining in Freetown, was a counselor at Benin Home, the rehabilitation center in Freetown, Sierra Leone, which I entered in January 1996. He told this to my publisher, Sarah Crichton, on the telephone today:

“A gentleman named Wilson was here investigating regarding Ishmael Beah’s book, and I told him emphatically - emphatically- that Ishmael’s accounts are accurate and correct. Wilson was going to Mogbwemo to find out if Ishmael Beah’s family was alive. When he came back to Freetown, he said he couldn’t find anyone alive, and the man who said he was Ishmael’s father was actually just a relative. But then he asked, what about confusion with the dates? And I said, there is no problem with the dates.

The rebels made sporadic attacks on the mining communities between ’93 and ’94, leading up to and in preparation for the major assault in ’95. In fact, military personnel were deployed to the area because there were these sporadic raids. Ishmael was caught in one of the earlier attacks. I told all this to Peter Wilson. I told him everything that Ishmael wrote is accurate and completely factual, and I explained to him what was confusing him. I do not understand what his paper’s agenda is. I do not understand why they are trying to blackmail this brilliant and honest young man.”

Mboka was contacted by The New York Times when they fact-checked the excerpts of my book which they published. His testimony did not appear in The Australian’s reporting.