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Monday, 23 July, 2001, 21:53 GMT 22:53 UK
Amazon.com cuts its losses
Amazon packing warehouse
Amazon says it is on target to report a 'pro forma' profit
Online retailer Amazon.com has reported a smaller than expected second quarter "pro forma" loss and says it will be in profit by the fourth quarter.

The Seattle-based company said its pro forma operating loss was $58m compared to $116m a year earlier, well below Wall Street analyst forecasts of a $80m loss.

Revenues for the quarter rose 16% to $668m, up from $578m a year ago, but were down from the previous quarter's $700m and below expectations.

Amazon has again promised it will post its first profit, if only "pro forma" which excludes many costs, such as stock options and interest payments on $2bn in debt, in the fourth quarter.

AOL Time Warner and Amazon also announced an extended alliance under which the media and internet services giant agreed to make a $100m investment in the e-tailer.

Amazon shares are well off their 12-month high of $49.63 but have recovered from a low of $8.10 to trade at $16.09 on Monday.

Although the company's shares have fallen 15% in the past six months, it has outperformed the tech-based Nasdaq index and rivals like Barnesandnoble.com which has dropped 40% in that period.

Profit target

Until recently, Amazon had concentrated almost entirely on growing sales at the expense of profits, but as the dot.com bubble burst, the e-tailer shifted its focus to reducing its costs to try and move into the black.

Amazon.com chief executive Jeff Bezos
Bezos hopes to cut the losses
"We continue to make progress toward reaching pro forma operating profitability in the fourth quarter of 2001," said Warren Jenson, Amazon's chief financial officer, in a statement.

The results are the sixth quarter where the company has reduced losses and the first time it has shown a profit in it US operations.

But the company's earnings from its core books, music and video unit, which accounts about 60% of its income, have only grown 1% in the past year.

Amazon added that it expects sales to slow in the coming months.

Future growth

It is on the electronics, tools and kitchen division which the company has pinned its hopes because it has the greatest potential to earn the company cash. It recently started selling electronics in Britain.

Revenues were also helped by Amazon's growing international segment where revenues grew by 75% and profits by 80%.

Amazon operates in Britain, Germany, France and Japan, and is building up its product line in these regions.

But to reach the profit goal, Amazon is scaling back operations, closing distributions centers, shelving plans for a new corporate headquarters and laying off 15% of its staff.

AOL stake

AOL Time Warner took a $100m stake in Amazon on Monday as part of an expanded alliance with the e-tailer.

Under the terms of the multi-year alliance, the two companies will team up to develop and offer online shopping service's for the 30m subscribers to America Online's internet services, an AOL statement said.

Amazon added it will promote AOL as its exclusive internet service provider, while also promoting an online boutique offering a variety of AOL Time Warner products and services, including service subscriptions.

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See also:

22 May 01 | Business
Amazon UK expands into electronics
01 May 01 | Business
Amazon loses top spot
24 Apr 01 | Business
Amazon reports smaller loss
12 Mar 01 | Business
Amazon chief's net stock warning
01 Mar 01 | Business
When will Amazon make a profit?
31 Jan 01 | Business
Amazon cuts 15% of its workforce
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