"The hardware team is working hard, the Amazon Fire TV and Fire TV stick, they're working hard to build enough to meet demand," Bezos said at Business Insider's IGNITION 2014 conference. Bezos noted that one of his jobs is to encourage people to be bold and though it's hard to get people to take bold bets he doesn't want to be in a position where the company has to make "Hail Mary" throws to fix it.
"It's going to take many iterations of the phone to get it right. Ask me in a number of years," Bezos said.
Initiatives like Amazon Web Services, the Kindle e-readers and tablets and the company's third-party marketplace are examples of mature businesses that are generating free cash flow and high return on invested capital, allowing Amazon to move into other areas by investing that cash and expanding. "It's like having a lemonade stand for 20 years and move into hamburger stand, hot dog stand and so on and so on."
Amazon noted Monday that sales of its Fire tablets were up three times year over year on Black Friday, and Kindle e-readers did even better, growing four times from last year.
In the third quarter, Amazon said operating cash flow increased 15% year over year to $5.71 billion for the trailing 12 months, and free cash flow nearly tripled to $1.08 billion for the trailing 12 months. The results included the purchase of Amazon's new Seattle headquarters for $1.4 billion.
Interviewer Henry Blodget pressed Bezos at the conference saying that although Amazon's free cash flow and ROIC metrics are solid the company hasn't turned a profit in some time. Bezos reminded the conference that Amazon said it would make big bets and some would fail.
"Warren Buffet has a great quote: 'You can hold a rock concert and a ballet concert, but don't advertise rock concert as a ballet.' Investors come in all shapes and sizes, there's not one type of investor. We said in our 1997 shareholder letter that we're going to take big bets and some will fail. You need to be clear about who you are," Bezos said
In the company's third quarter, Amazon said it lost 95 cents a share on revenue of $20.58 billion. Analysts were expecting a loss of 74 cents a share on revenue of $20.84 billion.
Guidance for the all-important holiday quarter is weak at first blush, with the company expecting sales to be between $27.3 billion and $30.3 billion, below analysts' estimates of $30.86 billion, according to Thomson Reuters. Amazon also expects to post a wide range of operating results next quarter, between a loss of $570 million and a gain of $430 million, including $470 million in stock-based compensation.
Bezos, who noted there is now a succession plan at Amazon (though he didn't reveal the plan), said although the company's stock price has been down 15% since the start of the year, it would be a mistake to focus on the quarterly numbers. Investors should instead focus on the controllable inputs, which drive better long-term results.
"Our stock price over a year, two years, five years, 10 years looks pretty good. We're a large company, but also because of our new areas, we're a startup and startups are volatile," Bezos said.
Amazon shares were lower in Tuesday trading, falling 0.6% to $324.02.
-- Written by Chris Ciaccia in New York
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