Despite Loss, Amazon Beats the Street, Has Cash

Riding strong electronics and international sales through a traditionally slower quarter, Amazon.com (Nasdaq: AMZN) posted a pro forma net loss of US$49 million, or 21 cents per share, for the first quarter ended March 31st, beating initial analyst estimates by 3 to 4 cents.

In discussing the results, Amazon chief executive officer Jeff Bezos emphasized the value its e-commerce platform is creating with new partners such as Borders.com.

"Over the last year, it's become increasingly clear that our platform has become valuable to other companies," Bezos said. "But we don't expect to rely on new revenues from this segment to reach our goal of pro forma profitability by the end of Q4. We will rely on vendor management, inventory management, and significant gains in operating productivity."

Bezos also said that Amazon expects to add additional product categories both in the U.S. and internationally.

Growth Chart

Amazon said that it expects its second quarter losses to remain flat or slightly improve during the next quarter.

Amazon's net sales for the first quarter rose 22 percent compared to the same quarter last year, with electronics net sales growing 56 percent and international sales 76 percent.

Shares of Amazon closed Tuesday at $15.68, down 52 cents, an hour before the company released its first quarter results. At the start of after-hours trading, the stock rose to $15.80.

Amazon stock has gained over the past few weeks, jumping from around $11, in response to early announcements by Amazon of the narrower-than-expected loss.

Momentum Building?

In January, Amazon beat forecasts for its fourth-quarter 2000 results, but warned at the time that sales for 2001 would be less than analysts expected. Amazon also announced a $150 million restructuring charge at that time and the layoff of 1,300 workers.

Amazon said Tuesday that it expects to take additional restructuring and other charges of over $50 million during the second quarter of the year.

Skeptics Remain

Not all analysts are convinced Amazon is positioned for profitability by the end of the year. The e-tail powerhouse became involved in a very public battle with former Lehman Brothers vice president of convertibles strategy Ravi Suria, over a report in which Suria said Amazon did not have enough money to survive 2001.

Amazon said Tuesday that it ended the first quarter with $643 million in cash and marketable securities.

One major area of analyst concern seemed to be verified Tuesday, however, with Amazon's core books, music and video category (BMV) showing only 2 percent year-to-year net sales growth. In contrast, late-comer Barnesandnoble.com said it will report a 23 percent increase in sales for the first quarter over the year-ago period.

"The real thing long-term that affects the growth (in BMV) is customer experience, and we do have folks working on initiatives that we think will be helpful," Bezos said. "All of the energy and attention that historically went into top-line growth, we are now very focused on operational profitability. (But) no one should believe we are done with U.S. BMV growth."

Brick Building

Most analysts agree on one point: that in order to reach its goal, Amazon must continue partnering with other brick-and-mortar retailers.

Amazon took a major step in that direction with the announcement on April 11th that it was taking over Borders' online operations and re-launching the Borders' site as a co-branded Amazon site in August.

The new site will combine the selection of books, music, videos and DVDs currently available through Amazon and several features unique to the Borders site, namely store location information and in-store event calendars.

Amazon also significantly expanded its product offerings over the first quarter, introducing a Software Downloads store, a global alliance to offer the Adobe e-books, and a new free music downloads community.