Amazon turns first-ever net profit on strong Q4 sales

Scott Hillis

SEATTLE: Amazon.com Inc. on Tuesday posted its first-ever net profit as

strong turnout from holiday shoppers fueled a 15 per cent rise in sales and

helped the online superstore trounce even the most wildly optimistic

expectations.

The Seattle-based retailer, which has lost nearly $3 billion since it went

public in 1997, said its fourth quarter net profit -- including charges like

acquisition expenses, stock compensation and interest payments on debt -- was $5

million, or 1 cent a share, compared to a loss of $545 million, or $1.53 a share

a year earlier.

Revenues grew to a record $1.12 billion from $972 million a year earlier,

growth of 15 per cent that was three times faster than what most Wall Street

analysts had expected. In pre-open trading, Amazon soared nearly 20 per cent to

$12 from its close of $10.16 last Friday.

The Seattle-based company also posted a pro forma net profit -- a figure

which includes interest but excludes other costs and is the figure watched by

Wall Street analysts -- of $35 million, or 9 cents a share, compared to a loss

of $90 million, or 25 cents a share last year and beating analyst estimates of

between 4 and 8 cents.

'Nailing' the quarter



"We nailed the quarter from a financial perspective," chief financial
officer Warren Jenson told reporters on a conference call. "We exceeded

expectations on virtually every line of our income statement."

Amazon had come under continual fire from many investors and analysts for its

mounting losses and practice of focusing not a net profit, but on a "pro

forma operating" figure that excludes many costs.

The net profit, announced hours before the opening of US markets, surprised

Wall Street because chief executive Jeff Bezos had promised only to break even

on a pro forma operating basis. On that basis, Amazon said it turned a $59

million profit, compared with a $60 million loss a year earlier.

Amazon also gave guidance for its current, first quarter, saying it expected

sales to grow between 11 and 18 per cent to between $775 million and $825

million, with a pro forma operating loss of between break even and $16 million.

Full-year revenues were seen growing by about 10 per cent, with pro forma

income from operations hitting about $30 million.

Amazon had been expected to lose between 7 and 12 cents a share on revenues

of about $747 million for the first quarter. For all 2002, it was seen losing

between 23 and 49 cents a share, with sales of $3.36 billion, according to

tracking firm Thomson Financial/First Call.

Core sales restart



After seeing a startling 12 per cent sales drop in its core books, music and
video segment in the third quarter, Amazon said growth there restarted last

quarter, rising 5 per cent worldwide to $538 million.

That was due partly to a promotion in which Amazon offered bigger discounts

on more expensive books, Jenson said.

But sales in the electronics, kitchen and tools segment, which once was an

engine of growth with strong double-digit performance, actually dipped 2 per

cent.

Jenson said Amazon was focusing more on making that segment more efficient.

It lost $20 million on $216 million in sales on a pro forma operating basis. He

also said sales of video game consoles, one of the year's hottest selling

electronics items, were counted as toy sales in which the revenue was actually

booked by toy partner Toys R Us.

The international segment, which covers Amazon units in Britain, Germany,

France and Japan, was by far the star performer as sales there rose 81 per cent

to $262 million.

Services, Amazon's smallest but most profitable division, rose 3 per cent to

$98 million. Services includes deals such as booking online orders for other

retailers like Toys R Us and Target.

(C) Reuters Limited.