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Amazon Beats Expectations as Sales Soar in Quarter

The online retailing giant rekindles investor hopes heading into the all-important holiday season.

October 25, 2000|CHARLES PILLER | TIMES STAFF WRITER

SAN FRANCISCO — Amazon.com Inc., the beleaguered Web retailer, gave investors some renewed hope Tuesday when it handily beat Wall Street's expectations for the third quarter.

The Seattle-based company posted losses from operations of $68 million, or 25 cents a share; the consensus of analysts polled by First Call/Thomson Financial had called for a loss of 33 cents.

Amazon's quarterly sales leaped 79% to $637.9 million, besting the $598.8-million forecast by First Call.

And sales by the company's year-old consumer-electronics business surpassed all other Amazon categories except books for the first time.

Amazon stock edged down 44 cents to close at $29.56 in regular Nasdaq trading Tuesday, before the quarterly results were announced, then surged as high as $33.38 in after-hours trade, following the earnings report.

Analysts applauded the company's improvement in controlling costs, but viewed the results as merely adequate. They pointed out that the all-important holiday shopping quarter will be a much better barometer of the company's progress.

"I'd neither be overly impressed or overly pessimistic" about the results, said Scott Reamer, an analyst with SG Cowen Securities, pointing out that the sales figures included a $20-million sale of inventory to Amazon partner Toys R Us Inc., rather than to customers. He called sales growth "just so-so."

Amazon has not been profitable since it began selling books over the Internet in 1995. The strategy of Amazon's CEO Jeff Bezos has been to squeeze more sales from its 25 million customers by selling lawn chairs, hardware, toys, consumer electronics and other products.

Amazon is the Web's largest and best-known retailer, but its slow journey to profitability also represents a symbolic stumbling block to e-commerce.

"I've always believed in the Amazon model," Reamer said. "The question is, at what time and at what scale?" He lists the stock as a "weak buy" because it may not offer a return that justifies the current risk to investors for years.

In a conference call, Bezos declined to predict when the company will achieve profitability, but he said that spending per "active customer" reached $130, up from $108 a year earlier. He added that U.S. operations are showing increasing strength.

"Over half the losses of the company are in businesses outside the U.S., an area we believe clearly deserves this level of investment," Bezos said.

Overall, Amazon suffered a net third-quarter loss of $241 million, or 68 cents a share, compared with $197 million, or 59 cents a share, in the period a year earlier.

However, the company predicted that operating losses--11% of sales in the last quarter--will decline to 5% to 8% in the fourth quarter and will drop below 5% in 2001.

"The soonest that we can see Amazon being profitable is the fourth quarter of 2001," said Ryan Alexander, with Wit Soundview in New York. And even that projection would require nearly flawless execution and rapid growth internationally, he said.

Amazon shares, which topped $106 last December, have been hammered this year along with most of the rest of the Internet sector.

In other tech earnings:

* @Home Corp.'s operating loss widened in the third quarter to $41.6 million, or 10 cents a share, from $4.2 million, or 1 cent, a year ago, in line with expectations. Revenue grew 51% to $169.9 million, less than the $185 million analysts anticipated.

* Compaq Computer Corp. said third-quarter profit more than quadrupled as the world's biggest maker of personal computers sold more servers to corporate customers and Internet start-ups. The company also said that declines in the euro will cause fourth-quarter profit to miss forecasts.

Third-quarter profit surged to $525 million, or 30 cents a share, from $117 million, or 7 cents, a year earlier. The results beat the average estimate of 29 cents. Sales jumped 22% to $11.2 billion. Though the weak euro will cut profit this quarter, Chief Executive Michael Capellas said sales will climb 18% to about $12.4 billion. He said earnings will rise more than 40% next year.

Fourth-quarter profit will be about 37 cents a share, less than the 41-cent average analyst forecast, because of the euro, which has fallen 10% in the last three months, he said. Capellas said Compaq still expects to earn $1.49 a share next year.

* CNet Networks Inc. posted a third-quarter profit of $6.2 million, or 7 cents a share, contrasted with a loss of 32 cents a share a year ago. The earnings beat expectations of 3 cents. Revenue more than doubled to $56.4 million from $26.4 million.

* BMC Software Inc. said earnings fell 53% to $27.9 million, or 11 cents, in its fiscal second quarter, meeting reduced expectations, as sales fell 22% to $323 million. The company also said third-quarter and fiscal-year results would miss forecasts.

* Computer Associates International Inc. said profit dropped 59% in its fiscal second quarter to $138 million, or 54 cents a share, but beat forecasts by 2 cents, as corporations reduced spending on mainframe computers. Sales rose 5.4% to $1.55 billion.

* Juno Online Services Inc. said its loss widened to $29.3 million, or 75 cents a share, from $16.1 million, or 46 cents, a year ago, but the performance was better than the 80-cent loss Wall Street anticipated. Revenue more than doubled to $30.1 million from $13.1 million.

*

Bloomberg News contributed to this report.

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