The Associated Press 
 
 Kindle Fire helps Amazon beat 1Q estimates 
 
 Amazon.com Inc. posted first quarter profits Thursday that blew by analysts' estimates and boosted the company's stock in extended trading. The online commerce giant said its Kindle Fire tablet computer was its best-selling item and helped lift revenue from digital movies and books. 
 
 Amazon chief financial officer Tom Szkutak told analysts that media sales are up, particularly in North America, thanks in part to the Kindle Fire, which is sold exclusively in the U.S. "Customers are buying a lot of content," he said. "You're seeing that accelerate." 
 
 Amazon's surprisingly good January-March quarter --which helped drive its stock up 13 percent in after-market trading-- came on the heels of a report from market tracker comScore Inc. that said the Kindle Fire had grabbed more than half of the U.S. market for Android-based tablet computers in February, just months after its Nov. 15 launch. 
 
 For the company as a whole, net income declined to $130 million, or 28 cents per share, from $201 million, or 44 cents per share a year ago. That was still better than the 6 cents per share of profit expected by analysts polled by FactSet. 
 
 Szkutak said the decline in profits was due to continuing investments the company has made in fulfillment centers, Web services infrastructure and video content rights. 
 
 "The good news is we have a lot of opportunity to invest and invent on behalf of customers," he said. "That's what we're doing. It is impacting our bottom line results." 
 
 Revenue grew 34 percent to $13.18 billion, also beating the $12.91 billion analysts expected. 
 
 North American media sales, which include sales of DVDs, CDs and video streams, grew 17 percent to $2.2 billion. The growth rate was more than twice as fast as the 8 percent year-over-year gain posted in the quarter through December. That quarter was hurt by sluggish video game purchases. 
 
 The company said it expects revenue in the current quarter to grow between 20 percent and 34 percent, or to between $11.9 billion and $13.3 billion, which includes the negative impact of foreign exchange movements. 
 
 Before Amazon released its outlook for the current quarter, analysts had expected second quarter revenue of $12.8 billion. That was higher than the midpoint of Amazon's forecast of $12.6 billion. 
 
 Amazon's stock rose $26.21, or 13 percent, to $222.20 in extended trading after the release of results. 

 A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008. 
 
 Amazon.com Inc's quarterly results beat Wall Street's most bullish expectations as heavy spending by the world's largest Internet retailer began to pay off through sales of more digital products on its new Kindle Fire tablet. 
 
 Amazon shares surged almost 15 percent, increasing the company's market value by more than $10 billion and boosting the stake of Chief Executive Jeff Bezos by almost $2.5 billion. 
 
 Analysts cheered first-quarter earnings and revenue which comfortably exceeded their forecasts. 
 
 "It's been a couple of years since Amazon beat expectations on both the top and the bottom line," said Colin Sebastian, an analyst at Robert W. Baird & Co. "That's reminiscent of the Amazon from three or four years ago." 
 
 Amazon is spending in three main areas: fulfillment centers to support online retail; video content and other media businesses; and infrastructure for its cloud computing service. 
 
 Among its latest ventures is the Kindle Fire, the tablet that competes with Apple Inc's iPad, that some analysts say the company is selling at breakeven or a small loss. 
 
 The Fire is important because it helps Amazon handle the shift from physical media products, like books, DVDs, video games and CDs, to digital versions of such content. 
 
 During the first quarter, nine out of 10 of the top selling products on Amazon.com were digital products, including Kindle e-books, movies, music and apps, the company noted. 
 
 Amazon Chief Financial Officer Tom Szkutak told analysts on a conference call that the company was pleased with growth in sales of the digital content that Kindle e-readers and the Fire tablet are designed to accelerate. 
 
 "One of the concerns with the shift from physical to digital has been whether Amazon will be able to compete," said Ben Schachter, an analyst at Macquarie. "They've done well in e-books, but now it looks like they're also doing well in other areas like video." 
 
 North America Media revenue, which includes books, DVDs and music, came in at $2.2 billion in the first quarter, up 17 percent from a year earlier. During the fourth quarter of 2011, this segment grew 8 percent. 
 
 Amazon's Szkutak said higher digital content purchases by Kindle customers helped North America media sales growth re-accelerate in the first quarter. 
 
 MARGINS IMPROVE 
 
 Amazon's heavy spending has pressured profit margins in recent quarters, hitting the company's shares. But in the first quarter, gross margins rose by about 120 basis points to roughly 24 percent, Macquarie's Schachter estimated. 
 
 "The biggest concern has been margins. A lot of investors have been looking for the company to demonstrate that it could get leverage on all of these investments it's been making," said Caris & Co analyst Scott Tilghman. 
 
 The situation for Amazon now resembled "what we saw back in the 2004 to 2006 time frame when the company was making a lot of investments and margins got squeezed. Then in the years following, margins expanded and revenue accelerated. It looks like the company is in that position right now." 
 
 Shares in the company leapt to $225 in extended trading, further swelling the company's already lofty valuation of more than 70 times earnings. 
 
 BY THE NUMBERS 
 
 In comparison, the 12-month forward price-earnings ratio for the S&P; 500 stands at about 12, while Apple is trading at 13 times forward earnings. 
 
 Amazon reported net income fell to $130 million or 28 cents per diluted share in the first quarter, versus $201 million or 44 cents a year ago. But that was far above the average Wall Street forecast for 7 cents a share. 
 
 First-quarter revenue of $13.18 billion, up 34 percent from a year earlier, was ahead of Wall Street estimates for $12.9 billion. Operating income was $192 million, compared with $322 million a year earlier. 
 
 "This looks like a quarter that has something for everyone, growth and margins to satisfy investors. This was a perfect balance. It looks to me there was a follow-through for the Kindle and Kindle Fire in the re-acceleration of growth in media," said Stifel Nicolaus analyst Jordan Rohan. 
 
 "We were expecting 15 cents EPS ... and we were probably the high end of the Street of where the margins were," said Evercore Partners analyst Ken Sena. 
 
 "You are starting from a very low point: modest improvement on a percentage basis. It looks pretty good. I think the margins have a long way to go, but I think at least to see them moving in the right direction is an encouraging sign." 
 
 (Editing by Phil Berlowitz)
– Selling Kindle Fires turns out to have been a very profitable way for Amazon to lose money. The no-frills tablet computer—which sells for slightly less than it costs to make—has now captured more than half of the Android tablet market, with rival tablets from Samsung and Motorola a long way behind, BusinessWeek reports. The Fire sales have given a huge boost to Amazon's sales of digital products, helping it post first-quarter profits yesterday that were above analysts' highest expectations. "One of the concerns with the shift from physical to digital has been whether Amazon will be able to compete," an analyst at Macquarie tells Reuters. "They've done well in ebooks, but now it looks like they're also doing well in other areas like video." The healthy results sent the company's shares rocketing nearly 15%, adding some $10 billion to its market value—and $2.5 billion to the net worth of CEO Jeff Bezos.