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Amazon's Profit Jumps, But It Eases Outlook

Amazon.com's third-quarter profits jumped more than a third during its third quarter as aggressive pricing drove sales in major categories and more third-party sellers hooked in with the online retailer's wagon.

Though strong, the results also missed analysts' expectations by a penny. Amazon's outlook for the fourth quarter also remained cautious compared to Wall Street expectations.

For the three month period ending Sept. 30, Amazon.com's profit was $54 million (13 cents per share), up by more than 200 percent compared to its net income of $15.6 million (4 cents per share).

Not counting other charges, Amazon said its pro forma net income in the third quarter was $73 million, (or 17 cents per diluted share), up 52 percent compared with $48 million, (11 cents per share) in the period. Analysts had been expecting earnings per share of 18 cents.

The company's overall sales were $1.46 billion during the period, up by 29 percent from the $1.13 billion it took during the same time last year. Analysts expected $1.47 billion.

International segment sales accounted for 52 percent of those sales at $646 million and 44 percent overall of worldwide net sales, company officials said.

"Our decision to put dollars into lower prices and free shipping instead of TV advertising continues to be embraced by customers," said Jeff Bezos, founder and CEO of Amazon.com, in a statement. "Customer adoption of free shipping hit another record high this quarter."

But it also ate into the company's margins, as its shipping costs grew by $7 million.

Sales through third-party sellers that are affiliated with Amazon.com also hit a high during the quarter, officials said, accounting for 28 percent of total unit sales during the period, up from about 22 percent during the same time last year.

Amid its cost-cutting to compete with other e-commerce players gearing up for the critical fourth-quarter holiday season, Amazon.com eased up on its sales expectations for the quarter. It called for revenues of between $2.29 billion and $2.5 billion, a lower range than analysts' consensus. For 2005, Amazon.com said it expected net sales of $7.40 billion to 8.15 billion, also slightly below analysts' expectations of about $8.261 billion.

Amazon.com's Electronics and Other General Merchandise categories also dominated. For the last year, sales in the division grew by 55 percent to $1.47 billion and now represent about 23 percent of the company's worldwide net sales.

Operating cash flow was $490 million for the trailing 12 months, compared with $284 million for the trailing 12 months ended Sept. 30, 2003.

Updates prior version to include pro forma EPS expectations