Amazon, the online bookseller, says it is heading for profit.

The company said that its underlying book business was profitable in the fourth quarter, and will make money this year.

So far, Amazon has been one of the darlings of the internet sector, despite posting bigger and bigger losses as it continued to expand.

The company added another 3.8m customers this quarter for a total of 17m - and it said that repeat customers made up 73% of its sales.

Its gross profit margins were 20%, better than expected by analysts.

The company had sales of $676m in the same quarter - three times the amount it sold one year ago.

Books accounted for half of its total sales, with music, videos, and toys making up the rest.

But it lost $323m, primarily through acquistions of other companies, marketing and inventory writedowns.

For the year, Amazon lost a record $719m on sales of $1.6bn, much more than the $124m loss for 1998.

Scott Reamer, of S.G. Cowen, said that Amazon's model of expanding into new areas had worked.

"A 90% revenue growth in a quarter is good by any measure," he added.

The company wrote down $39m of stock, and still has $200m of inventory left.

Amazon, which still has $700m in cash, is reportedly talking to banks about raising an additional $1bn in loans.

Amazon shares moved up to $74 in after-hours trading, up from $69 earlier.

That values Amazon at more than $20bn.