Amazon Makes Some Real Money

Beating its own estimates of a pro forma profit for the fourth quarter,
online retail giant posted a fully diluted net profit for the
first time ever — including all of its interest expenses — of 1 cent per
share as it recorded its first billion-dollar income period.

The Seattle-based company posted record fourth quarter
net sales of $1.12 billion, compared with $972 million in the fourth quarter
of 2000, an increase of 15 percent.

And the company took the occasion to launch a new class of economy shipping,
called Super Saver Shipping, which is free on qualifying orders of more than

Naturally, Wall Street liked the news, sending the stock up $2.39 or 23
percent to $12.55 shortly after the opening bell.

Pro forma net profit for the fourth quarter of 2001 was $35 million, or 9
cents per share, compared with a pro forma net loss of $90 million, or 25
cents per share, in the fourth quarter of 2000.

On a GAAP basis, the company recorded a fourth quarter 2001 net profit of $5
million, or 1 cent per share, compared with a fourth quarter 2000 net loss of
$545 million, or $1.53 per share.

Analysts surveyed by Thomson Financial/First Call on average had predicted a
loss of 7 cents per share on revenue of $1.01 billion.

International sales across the Amazon’s UK, Germany, France and Japan sites
grew 81 percent. More than 29 percent of the company’s sales were made to
international customers. In addition, the company’s operations for the UK and
German sites had a combined pro forma operating profit for the fourth quarter
of 2001, just three years after their launch.

The Super Saver Shipping offer is not a seasonal or limited-time promotion,
but an everyday, 365-days-a-year offer, Amazon said.

“There are two types of retailers: those that work hard to raise prices and
those that work hard to lower prices. Though both models can be successful,
we’ve decided to relentlessly follow the second model,” said Jeff Bezos,
founder and CEO of

“Our improvements in productivity allowed us to lower book prices and now
allow us to offer free shipping,” said Warren Jenson, chief financial
officer. “We expect that these money-saving initiatives for customers will
continue to play an important role in our growth.”

On the financial front, Amazon said that its net sales for the 2001 fiscal
year reached a record-setting $3.12 billion, a 13 percent increase. Cash and
marketable securities were approximately $1 billion as of Dec. 31, 2001.

“We nailed the quarter from a financial perspective,” Jenson said in a
conference call. “We exceeded expectations on virtually every line of our
income statement.”

Going forward, Amazon said it expects first quarter 2001 net sales to be
between $775 million and $825 million, or growth of 11 percent to 18 percent.
Positive operating cash flow, and possibly free cash flow, is expected. Pro
forma income from operations is expected to be $30 million or more.

Pro forma loss from operations for the first quarter is expected to be
between break-even and $16 million, or between zero and 2 percent of net
sales. The first quarter traditionally is one of the worst for many
retailers. The company did not talk about the outlook for all of 2002.

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