“It appears that Amazon is gaining share the old-fashioned way,” ThinkEquity analyst Ed Weller noted last week, “by acquiring more and more customers…and selling more to each of them.” And judging from the nice gain in third-quarter earnings the company posted after Thursday’s closing bell, that would seem to be the case.

Net income for the period surged 69 percent thanks to a strong increase in sales. Analysts had been looking for earnings of 33 cents a share on revenue of $5.02 billion for the quarter. Amazon (AMZN) reported 45 cents a share, compared with 27 cents a share for the same period the previous year. Revenue rose 28 percent to $5.45 billion.

Once again, it seems Amazon has not broken out Kindle sales numbers in its report, though CEO Jeff Bezos did stress them in an earnings release. Said Bezos: “Kindle has become the #1 bestselling item by both unit sales and dollars–not just in our electronics store but across all product categories on Amazon.com. It’s also the most wished for and the most gifted. We are grateful for and energized by this customer response.”

Looking ahead to the key fourth quarter, Amazon is calling for revenue in the range of $8.125 billion to $9.125 billion. Analysts have been forecasting revenue of $8.13 billion. Given that the upcoming quarter includes the annual holiday shopping binge, Amazon may be looking at another blowout quarter.

Shares in the company are spiking on the news, up over nine percent to $101.90 as I write this.

Below, an excerpt from the suit and the document in full:

On or about early-June, 2009, Mr. Gawronski purchased for $0.99 an electronic copy of George Orwell’s “1984″ for use on his Kindle 2 from Amazon’s Kindle Store. He purchased the book because it was assigned to him as a summer homework assignment by a teacher at his high school.

On or about July 20, 2009, after reading online about Amazon’s practice of remotely deleting copies of “1984″ from Kindles, Mr. Gawronski powered on his Kindle 2 only to watch “1984″ vanish before his very eyes. Because “1984″ was the most recent book he had been reading on his Kindle 2 prior to July 20, 2009, the Kindle 2 powered on to the last page of “1984″ Mr. Gawronski had been reading. Within moments of powering on his Kindle 2 to this page of “1984,” the entire e-book disappeared as Amazon immediately remotely deleted it from his Kindle 2.

Mr. Gawronksi did not consent to Amazon remotely deleting “1984″ from his Kindle 2.

As part of his studies of “1984,” Mr. Gawronski had made copious notes in the book. After Amazon remotely deleted “1984,” those notes were rendered useless because they no longer referenced the relevant parts of the book. The notes are still accessible on the Kindle 2 device in a file separate from the deleted book, but are of no value. For example, a note such as “remember this paragraph for your thesis” is useless if it does not actually a reference a specific paragraph. By deleting “1984″ from Mr. Gawronski’s Kindle 2, this is the position in which Amazon left him. Mr. Gawronski now needs to recreate all of his studies.

Amazon_Complaint

Under the terms of the deal, the retailer will acquire all outstanding Zappos shares in exchange for roughly 10 million shares of Amazon common stock, valued at about $807 million, and some $40 million in cash and restricted stock. Amazon (AMZN) says the deal should be completed by fall.

“This morning, our board approved and we signed what’s known as a ‘definitive agreement,’ in which all of the existing shareholders and investors of Zappos (there are over 100) will be exchanging their Zappos stock for Amazon stock,” Zappos CEO Tony Hsieh said in a post to the company blog. “Once the exchange is done, Amazon will become the only shareholder of Zappos stock….

“We think that there is a huge opportunity for us to really accelerate the growth of the Zappos brand and culture,” Hsieh continued, “and we believe that Amazon is the best partner to help us get there faster. Amazon supports us in continuing to grow our vision as an independent entity, under the Zappos brand and with our unique culture.”

“Zappos is a customer focused company,” said Amazon CEO Jeff Bezos in a statement. “We see great opportunities for both companies to learn from each other and create even better experiences for our customers.”

If the shoe fits, right?

Below, Bezos announces the acquisition in person.

According to BoomTown’s reliable sources, the elusive Microsoft (MSFT)-Yahoo (YHOO) deal is making “meaningful” progress. Accordingly, BoomTown wondered whether Microsoft CEO Steve Ballmer planned on visiting Carol Bartz, Yahoo CEO, on his trip to the Bay Area this week or if the proximity of Stanford to Yahoo was just chance, given that Stanford was his main destination. At least one of his reasons for being in the area was to give a talk at Stanford’s Memorial Auditorium for the Entrepreneurial Thought Leaders Seminar. BoomTown liveblogged the session and attempted to determine Ballmer’s soul-mate status. Given some of the acquisition rumors flying around this week, BoomTown decided to conduct a little experiment. Would the same sort of “Brangelina”-esque mystique apply as well to the combination of two incredibly hot tech companies? Would it create the same hysteria, and sell as many magazines (figuratively speaking)? (Non) results on BoomTown.

MediaMemo had a Kindle-ish kind of week. Amazon (AMZN) unveiled the latest iteration of the device on Wednesday in New York, and MediaMemo was there to liveblog the whole thing, including the crazy demo, during which the location’s facilities prevented Jeff Bezos from demoing pretty much anything. Also, Bezos forget to mention the fact that Amazon will be conducting a Kindle pilot program at six colleges starting this fall. Forget about getting your hands on one, though–only five students per school will be carrying their textbooks around in a Kindle instead of a backpack. MediaMemo’s advice for cash-strapped students once the devices do become available? Wait three years until the price drops. $489 is a lot to shell out on a student’s budget.

News Corp.’s (NWS) Rupert Murdoch had some news this week during the company’s earnings call (besides earnings)–he believes that while the state of the economy is still dire, “the worst Is over.” He also noted that although he plans to extend WSJ’s online pay model to his strongest properties soon, News Corp. will not be selling any of its content via the Kindle, as some of its competitors will. All this and more on MediaMemo.

On Thursday, Digital Daily liveblogged a press event hosted by Google (GOOG) in advance of its annual shareholder meeting. Some of the topics covered? Time Warner’s (TWX) AOL, the econalypse, YouTube, netbooks, China, antitrust issues and the Apple (AAPL) Board. CEO Eric Schmidt was most forthcoming about the Federal Trade Commission’s just-opened inquiry into Google and Apple’s overlapping boards: When asked if he’d resign from the board, he replied that the thought “hasn’t crossed his mind.” Elsewhere, Oracle (ORCL) CEO Larry Ellison probably ruined a few people’s mornings over at IBM (IBM) and HP (HPQ) when he told a Reuters reporter that part of his plan for Sun (JAVA) is to create an integrated hardware and software solution, effectively making their competition a little bit steeper. As such, it will be extra interesting to see how the little matter of Sun and a possible violation of the Foreign Corrupt Practices Act plays itself out in the courts. Details on Digital Daily.

Over in Personal Technology, Walt Mossberg reviewed Quickoffice, a program that brings some full-fledged word processing capabilities to the iPhone, but has its limitations. In Mossberg’s Mailbox, Walt answered questions about using Macs and PCs together on the same home network, backing up and transferring Outlook Express data and whether it’s possible to find a GPS program for the iPhone that will speak its directions. In the Mossberg Solution this week, Katie Boehret reviewed the Sidekick LX and found it a little out of touch with its market. More in-depth discussion, of course, on the section of the site containing Walt’s columns.

More next week. RIP Dom Deluise.

After its official unveiling on Feb. 9, the e-book reader started shipping on Monday, and actually managed to grab much–but not all–of the hype that’s surrounded Twitter of late. The device has been met with much acclaim, though it’s by no means unanimous. Jeff Bezos made an appearance on “The Daily Show” Monday night to make his pitch to an as-yet unimpressed Jon Stewart. His main sell? “We’d make it cheaper if we could.” Roy Blount Jr., President of the Authors Guild, isn’t thrilled about the Kindle either, but his objection isn’t price–it’s that he believes the text-to-speech feature on the device threatens the audio book market. Rather than engaging in battle with the Guild, Amazon (AMZN) decided to modify the Kindle’s software to make text-to-speech optional. Meanwhile, the Hearst Corporation announced development of its own “Kindle Kopy” aimed at capturing the newspaper and magazine market. The Kindle 2 itself has been shipping for just a week and it’s already gotten some print media looking over its shoulder. It remains to be seen, though, whether it’ll earn the moniker of “iPod for books.” Walt Mossberg’s comprehensive review of the device this week provided a glimpse into its actual pros and cons and some insight into the Kindle hubbub from a hands-on perspective.

Elsewhere, much of the news this week was about reorganizations in the digital space. BoomTown covered the much-anticipated Yahoo (YHOO) reorg, which was sketched out by CEO Carol Bartz for employees first in a post to the company blog, then elaborated upon in not one, but two, internal memos. Even BoomTown’s attention began to wander there toward the end. Must’ve been something in the water this week, because Time Warner’s (TWX) AOL kicked in a little reorganization of its own–CEO Randy Falco announced that Maneesh Dhir, head of AOL International, would be leaving the company and returning to his entrepreneurial roots, and ad head Greg Coleman announced a reshuffling of his own group. Over at News Corp. (NWS), upon official announcement of President and COO Peter Chernin’s departure, CEO Rupert Murdoch alluded to a reorg sometime in the future, and an immediate commitment to “streamlining” the business.

In Mossberg’s Mailbox this week, Walt answered questions about transferring data to an iPhone, giving Vista a dedicated graphics card, and using TrueSwitch to transfer email accounts when switching ISPs. And in the Mossberg Solution, Katie Boehret took a look at the ways different mobile companies back up your data and give you access to it.

More next week.

They don’t have the right to read a book out loud. That’s an audio right, which is derivative under copyright law.”

– Paul Aiken, executive director of the Authors Guild, on Kindle 2’s text-to-speech feature

There is no vision for that. We deliver video to IP [Internet protocol]-connected devices today, but they aren’t made by Amazon. I don’t see why we would need to make such a device. There is a proliferation of such devices. Plus that technology is being built right into televisions.”

– Amazon CEO Jeff Bezos says the company has no plans for a video Kindle.

The online retailer reported a nice gain in earnings for the fourth quarter thanks to strong sales during the holiday shopping season. For the period ended Dec. 31, Amazon (AMZN) reported earnings of $225 million, or 52 cents a share, compared to earnings of $207 million, or 48 cents a share, for the same period the previous year. Revenue grew 18 percent to $6.7 billion. The Street had been expecting earnings of 40 cents a share on revenue of $6.48 billion. “We remain relentlessly focused on serving customers with low prices, great selection and free shipping offers, including Amazon Prime,” Bezos said in a statement. “We’re particularly grateful for the unusually strong demand for Kindle in the fourth quarter.”

The full earnings release below. But first a few highlights:

• No mention of Kindle sales or the 8-K in the release that I can find. Only the announcement that selection increased by 45,000 titles in the fourth quarter to 230,000 titles
• 3.6 percent operating margin. Very, very tight
• Better-than-expected forecast for Q1. Looking ahead, Amazon expects revenue to come in between $4.53 billion and $4.93 billion. Analysts were predicting $4.54 billion
• AMZN trading up nearly 10 14 percent on the news

Amazon.com Announces Fourth Quarter Sales up 18% to $6.70 Billion; 2008 Free Cash Flow Grows 16% to $1.36 Billion

Operating income is expected to be between $125 million and $210 million, or between 37% decline and 6% growth compared with first quarter 2008. This guidance includes approximately $75 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

Obama will appoint the nation’s first Chief Technology Officer (CTO) to ensure that our government and all its agencies have the right infrastructure, policies and services for the 21st century. The CTO will ensure the safety of our networks and will lead an interagency effort, working with chief technology and chief information officers of each of the federal agencies, to ensure that they use best-in-class technologies and share best practices.”

– Excerpt from “The Blueprint for Change: Obama’s Plan for America”

The short list of candidates for President Elect Barack Obama’s cabinet-level CTO may be quite a bit shorter than Washington insiders claim. In the run-up to Tuesday’s election, Vint Cerf, Google’s (GOOG) chief Internet evangelist, Microsoft (MSFT) CEO Steve Ballmer, Google CEO Eric Schmidt, Princeton professor Ed Felten and Amazon (AMZN) CEO Jeffrey Bezos were among the names of those who might be considered for the job. But it’s beginning to look more and more like the Obama camp already has someone in mind for the position: Julius Genachowski.

A longtime friend and adviser of Obama’s, Genachowski was named to the President-elect’s transition team today. And while that obviously doesn’t make him a sure thing for cabinet CTO, he’s certainly well-qualified for the job. After all, Genachowski was a former adviser to Federal Communications Commission chairs Reed Hundt and Bill Kennard. And with a lengthy stint at Internet company IAC, his acumen includes Internet business operations as well as Washington tech policy.

And then there’s this: Genachowski’s the guy who came up with the idea of cabinet-level CTO in the first place. Dibs!

This year’s D conference had its share of great lines–tired ones, too (we’re all clear on the subject of Facebook and information sharing, right?). Here’s a selection of the former…

Guys like us avoid monopolies. We like to compete.”

–Microsoft (MSFT) Chairman Bill Gates

AOL is the Rodney Dangerfield of the Web. We don’t get no respect.”

–Jeff Bewkes, president and CEO, Time Warner (TWX)

I will probably never be a CEO again.”

–Yahoo (YHOO) CEO Jerry Yang states the obvious

It’s a company that creates technology.”

–Facebook CEO Mark Zuckerberg answers the question, “What is a technology company?”

Did you have anything to do with the New York Post’s endorsement of Obama?”

–Walt Mossberg to Rupert Murdoch

“Yeah.”

–Rupert Murdoch to Walt Mossberg

I didn’t leave business school to go bankrupt.”

–Microsoft CEO Steve Ballmer on his first days at Microsoft

You would have loved Windows 1.0, Walt. You would have LOVED it.”

–Microsoft CEO Steve Ballmer

Microsoft’s philosophy is to ‘do things better.’ And Vista has given us lots of opportunity to do that.”

–Microsoft Chairman Bill Gates

Microsoft Bob? All Bill’s idea.”

–Craig Mundie, chief research and strategy officer of Microsoft Corp.

It makes revolutionary desserts you never could have imagined!”

–Microsoft CEO Steve Ballmer recalls the slogan he used to market Coldsnap Freezer Dessert Makers at Proctor & Gamble

C’mon, you CAN’T be happy with the way this Vista thing has gone.”

–Walt Mossberg to Microsoft CEO Steve Ballmer

In some ways the Web is the most important book in the world.”

–Jeff Bezos, CEO, Amazon.com (AMZN)

We try to stick to violence against small animals.”

– Activision (ATVI) CEO Bobby Kotick on violence in the company’s games.

I have to determine whether the joy of craplets is worth preserving.”

–Sony (SNE) CEO Howard Stringer on craplets on Sony PCs

Facebook is all about information and helping people share it.”

–Facebook CEO Mark Zuckerberg and COO Sheryl Sandberg demonstrate “I-Have-Nothing -To-Say-And-I-Am-Saying-It” public relations.

‘Sharing information?’ Isn’t that a drinking game? Every time Mark Zuckerberg says it you have to drink.”

–Kara Swisher

Page got one of the two chairs and Schmidt wound up on the floor.”

–Facebook CEO Mark Zuckerberg on meeting with Google’s (GOOG) Larry Page, Sergey Brin and Eric Schmidt in his spartan apartment.

All lives are equal.”

–Melinda Gates, co-chair, Bill & Melinda Gates Foundation on D6 Highlights

Betamax 2.”

–Sony CEO Howard Stringer on what his epitaph would have been had Sony lost the DVD format war.

If we were any more successful, we’d be bankrupt.”

–Sony CEO Howard Stringer on the success of Sony’s LCD business.

Hollywood is a community that’s so inbred, it’s a wonder the children have any teeth.”

–Barry Diller, chairman and CEO, IAC (IACI)

People loved their horses, too. But you don’t keep riding your horse to work just because you love it.”

–Amazon CEO Jeff Bezos on the difference between physical books and digital ones

I could take him.”

–Dell (DELL) CEO Michael Dell on his chances of success in a brawl with Apple CEO Steve Jobs

It’s amazing how elastic the human brain turns out to be.”

–DEKA Research founder Dean Kamen

It’s like Baby Mama, with me as the mama.”

–Intellectual Ventures founder Nathan Myhrvold explains the company’s “invest in inventions” business model.

Windows 95 was a nice milestone.”

–Microsoft Chairman Bill Gates on one of the high points of his career

I won’t ever stop until you’re either the biggest thing around, or you’re dead.”

–Kara Swisher on her relentless coverage of Facebook

We think they’re fantastic … But you don’t want anyone to be a monopoly.”

–Rupert Murdoch on Google

Coming from Google, you don’t exactly spend a lot of time at Microsoft.”

–Facebook COO and former Vice President of Global Online Sales and Operations at Google Sheryl Sandberg

We’re trying to outbook the book.”

–Amazon CEO Jeff Bezos on Kindle.

There go the dairy ads.”

– Walt Mossberg on 23andMe’s discovery that colleague Kara Swisher is lactose intolerant

We didn’t buy Alaska to save a couple of elk.”

–News Corporation (NWS) Chairman and CEO Rupert Murdoch on Alaska as a solution to the current fuel crisis.

Where’s Rupert’s elk-despising gene?”

–Kara Swisher while reviewing Murdoch’s genotype

That’s not serious … he just wants to make himself a few hundred million dollars …”

–Rupert Murdoch on Carl Icahn’s proxy fight for Yahoo

You’re the chairman of the FCC. How did you allow this to happen?”

–Walt Mossberg grills FCC Chairman Kevin Martin on the lousy broadband situation in the states.

Shares in the company, which have already lost more than 20% of their value in 2008, slipped further in early trading (but recovered later), though Amazon said yesterday that profits more than doubled in its fourth quarter. “This quarter showed accelerated sales growth and record operating profits,” CEO Jeff Bezos said in a statement released with the earnings. “In our view, these unusual financial results are driven by one thing: continuously improving the customer experience.”

But such enthusiastic pronouncements didn’t matter a whit to jittery investors worried about a slowing economy and Amazon’s tight margins. Shares of the retailer, which closed yesterday at $74.21, fell 8.2% to $68.15 before opening bell today. And they slipped even further, to $66.49, after Amazon announced plans to acquire Audible in a deal valued at about $300 million – a premium of more than 20 percent over the audiobook retailer’s Wednesday closing price.

Perhaps investors haven’t yet realized that Audible controls an astonishing 95% of the online audiobook market and, as Staci Kramer over at paidContent notes, is the top spoken-word provider for Apple’s iTunes Store. Amazon almost certainly plans to distribute Audible content wirelessly via its Kindle e-book reader, which may turn it into the iPod of e-book readers whether Apple CEO Steve Jobs likes it or not. “It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore,” Jobs said recently when asked about the Kindle. “Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.”

That may be so, but as Jobs well knows they do listen. Which begs the question: Why didn’t Apple buy Audible? “We have long suspected that Apple would be the party most interested in acquiring Audible, considering the close ties between the two companies,” Richard Fetyko, an analyst with Merriman Curhan Ford, wrote in a research note this morning. “Audible’s audiobook content is sold within Apple’s iTunes online music store, which represents about 25% to 30% of Audible’s revenue. Also, most of Audible’s customers are iPod users. We would not be surprised to see [if] Apple made a bid for Audible to preserve its leadership in online-audio content distribution. There are no alternatives to Audible in the marketplace with any significant scale.”