- The Washington Times - Wednesday, January 23, 2002

SEATTLE (AP) Amazon.com, the pioneering Internet retailer that has come to symbolize both the potential and the pitfalls of dot-com commerce, surprised Wall Street and the rest of the world yesterday by recording its first quarterly profit.
The world's largest Internet retailer said it earned $5 million, or 1 cent a share, for the quarter ending Dec. 31. That compared with a net loss of $545 million, or $1.53 per share, in the year-ago period.
Sales rose 15 percent to $1.12 billion from $972 million in the fourth quarter of 2000, showing the company had healthy sales in the all-important holiday quarter despite what was for many retailers a lackluster season.
"I've always known that our business model worked," Jeff Bezos, the company's founder, told reporters.
Mr. Bezos, Time magazine's 1999 Person of the Year, also lauded his employees for cutting costs significantly during the past year, as the company abandoned quick growth in favor of turning a profit for disgruntled investors.
Operating expenses fell 24 percent in the fourth quarter, compared with a year earlier, Amazon Chief Financial Officer Warren Jenson said.
The results, helped by lowered prices and companywide penny-pinching, sent shares in Amazon up $2.44, or 24 percent, to close at $12.60, on the Nasdaq Stock Market.
"I am impressed. There's no question about that," said hedge fund manager Scott Reamer of Union Tree Capital Research in Denver.
Amazon, once a darling of Wall Street and now one of the last survivors of the dot-com fallout, has in the past year endured a barrage of criticism for burning through cash under the motto "get big fast" at the expense of immediate profits.
Since 1997 the year it went public Amazon has lost $2.9 billion on sales of about $8.3 billion.
Mr. Bezos said costs were cut in a number of ways in recent months, including reducing marketing expenditures and asking employees to tighten belts wherever possible.
"We were just very, very focused on it," Mr. Bezos said. "There was no single silver bullet that led to that."
Analysts said yesterday's results proved that size matters in electronic commerce.
"E-commerce isn't an easy matter," said Jeetil Patel, an analyst with Deutsche Banc Alex. Brown. "It took the company $1.2 billion in revenue to achieve a profit, so scale is definitely a critical success factor. Not a lot of smaller companies will be able to pull this off."
The Seattle-based company's fourth-quarter results also were helped by lowered book prices which prompted strong sales for bargain-hungry shoppers in the holiday quarter.
Despite the strong results in the fourth quarter, Amazon said it still expects pro forma operating results ranging between break-even to a loss of $16 million in the first quarter ending March 31, on forecast net sales of between $775 million and $825 million. The company did not offer guidance on net income estimates.
For the fiscal year ended Dec. 31, the company recorded a net loss of $567.2 million, or $1.56 per share, compared with a net loss of $1.41 billion, or $4.02 per share, in 2000.
Net sales were $3.12 billion compared with $2,76 billion a year ago.

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