Amazon Takes Hit As LivingSocial Reports Huge Net Loss
Amazon reported its first quarterly net loss in 18 quarters yesterday, and it’s not hard to see where it’s placing most of the blame.
Daily deals aggregator LivingSocial has been cited as a big part of Amazon’s problem in the retail giant’s reported earnings.
“Net loss was $274 million in the third quarter, or $0.60 per diluted share, compared with net income of $63 million, or $0.14 per diluted share, in third quarter 2011,” Amazon’s release said. “The third quarter 2012 includes a loss of $169 million, or $0.37 per diluted share, related to our equity-method share of the losses reported by LivingSocial, primarily attributable to its impairment charge of certain assets, including goodwill."
That $169 million loss is ugly in any context, but when you consider that Amazon had originally invested $175 million in LivingSocial, it appears even worse.
There are two sides to every story, though, and LivingSocial CEO Tim O’Shaughnessy sought to counter Amazon’s negative release with his version of his company’s losses.
According to O’Shaughnessy, LivingSocial posted a net loss of $566 million, but $496 million came from a write-down from some 2011 acquisitions and another $45 million was related to stock compensation. In fact, his report shows that LivingSocial nearly doubled its global revenue from Q3 2011, and posted positive operating cash flow for the first time since 2009.
“In layman's terms, we took a charge of around $496 million because we had to revalue some of the companies we acquired last year,” O’Shaughnessy wrote in a memo obtained by the Washington Business Journal. “As you know, the market has also dropped over that same time for similar public tech companies. Those changes in valuation showed up as an ‘impairment’ in our financial statements, but they do not affect the day-in, day-out operations of the business.”
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