Amazon.com Posts First Annual Profit

<br>SEATTLE (AP) _ Amazon.com rode discounts and free shipping to strong fourth-quarter results, capping a year in which the Internet retailer posted its first annual profit. <br><br>Net income for the

Wednesday, January 28th 2004, 12:00 am

By: News On 6

SEATTLE (AP) _ Amazon.com rode discounts and free shipping to strong fourth-quarter results, capping a year in which the Internet retailer posted its first annual profit.

Net income for the quarter ended Dec. 31 was $73.2 million or 17 cents per share, far better than the $2.7 million, 1 cent per share, it earned in the same period of 2002.

Amazon said Tuesday that some portions of its financial results were helped by foreign currency exchange rate fluctuations, including product sales and gains from converting multiple currencies within the company. But those gains were offset by the negative impact exchange rates had on about $690 million in company debt that is in euros.

For the quarter, the results were hurt by $23 million because of currency fluctuations against the dollar. Without that, the company would have had earnings of $96.2 million for the three-month period.

Sales for the three-month period were nearly $1.95 billion, up 36 percent from $1.43 billion a year earlier.

Amazon.com chief executive Jeff Bezos said the company and customers benefited from year-round free shipping options and discount pricing. But analysts said some investors may be concerned Amazon has cut prices too deeply to gain customers.

``The question, I think, in some people's minds is, `Do they need to lower prices by the degree to which they have been?''' said Dan Geiman, an analyst with McAdams Wright Ragen.

Added Safa Rashtchy, an analyst with Piper Jaffray: ``It's great to be an Amazon customer right now, but maybe it's not good to be an Amazon shareholder right now.''

For the most recent quarter, the Seattle-based company said its net sales benefited by $98 million from fluctuations in foreign currency rates, as compared to the same period a year earlier. Without that benefit, sales would have been up 29 percent, chief financial officer Tom Szkutak said.

Amazon said pro forma net income, which excludes certain items, was $125 million or 29 cents per share, meeting the expectations of analysts polled by Thomson First Call. That compares with pro forma net income of $75 million or 19 cents per share in the fourth quarter of 2002.

Rashtchy said some investors also might have been looking for the company's impressive sales growth to translate into bigger profits. But he said the company's price-cutting strategies are a smart way to build the business for the long term.

Amazon.com also logged its first annual profit. For the 12-month period, the company reported net income of $35.3 million or 8 cents per share on revenue of $5.26 billion. That compared with a loss of $149.1 million or 39 cents per share on revenue of $3.93 billion in 2002.

Amazon.com said full-year results were hurt by $90 million because of the weak dollar's effect on foreign currency rates. Without that, the company would have had net income of more than $125 million.

Amazon said it expects sales of between $1.39 billion and $1.49 billion in the current first quarter, an increase of 28 percent to 38 percent over the first quarter a year earlier. For the year, it projected sales of $6.2 billion to $6.7 billion.

Amazon.com, which began as a virtual book store, now sells everything from steaks to golf balls online.