~OT~....I wonder if DELL should 'make a pledge too'...
<<Amazon.com Shares Climb 21% as Company Pledges to Reduce Losses This Year
By Heather Landy
Amazon.com Shares Rise on Outlook for Reduced Losses (Repeat)
Seattle, Feb. 3 (Bloomberg) -- Amazon.com Inc. shares rose 21
percent after the Internet's biggest retailer said losses will
begin to shrink this year and reassured investors that its
spending on marketing and investments will pay off.
The stock jumped 14 3/4 to 84 3/16, its second-biggest one-
day increase ever.
Amazon.com's new emphasis on trimming its losses, which total
$882 million since 1994, is a shift for founder Jeff Bezos. The
chief executive has repeatedly said it would be a mistake to forgo
spending on marketing, new products and other investments in order
to turn a profit quicker.
''This is a company that is going to make a lot of money, and
it's going to be sooner rather than later,'' said J.P. Morgan
analyst Tom Wyman, who rates the shares ''buy.''
Amazon.com yesterday said its fourth-quarter loss of
$323.2 million, or 96 cents a share, marked the ''high point'' for
losses. That compared with a loss of $46.4 million, or
15 cents, a year ago. Sales rose to $676 million from
$252.8 million.
Bezos didn't say when he expects Amazon.com to make money. He
also said the Seattle-based retailer would still make investments
to better serve customers and -- eventually -- investors.
The statements about reducing losses give investors the
confidence that Amazon.com ''could turn off the spending spigot
and be really profitable,'' said analyst Ron Sachs at Janus
Capital, Amazon.com's biggest outside shareholder with
28.8 million shares as of September.
Books
The company for the first time said the U.S. books business -
- its oldest product line -- made money in the quarter.
Executives wouldn't give detailed profit data for the book
business. There are no strict accounting rules saying how the
company should allocate marketing expenses or the cost of shipping
a book and a toy in the same package.
''With limited information, it is difficult to get a clear
picture of how the company is truly functioning on an operating
level,'' PaineWebber analyst Sara Farley wrote in a report. She
rates the stock ''neutral.''
A profit from books may signal that the company will soon
make money as a whole, since Bezos predicts that newer product
lines will take less time to become profitable, investors said.
''The fact that they seem to be profitable now in the oldest
business is a real strong indication that the business model is
not flawed, that there is indeed a method to the seeming
madness,'' said fund manager Drew Cupps at Strong Funds, which
owned 382,400 shares as of September.
Amazon.com was the second most-active U.S. stock, with almost
44 million shares traded. It had fallen from a high of
113 in December on concern that spending would exacerbate losses.
Focus on Profit
Amazon.com also broke out sales of some other products,
though it didn't give financial details.
The company had fourth-quarter U.S. sales of $317 million for
books, $78 million for music, $64 million for DVDs and video, and
more than $95 million for toys and other children's products. It
didn't provide sales for electronics and software, home-
improvement products, auctions or zShops, its virtual mall.
Chief Financial Officer Warren Jenson, who came from Delta
Air Lines Inc. in September, may be instilling greater discipline
in spending and an increased focus on profit, investors said.
Amazon.com will also get a boost from a series of agreements
to promote Drugstore.com Inc., Ashford.com Inc. and other Web
sites in exchange for payments over several years.
The arrangements let Amazon.com offer a wider range of
products, making the company look more like a so-called portal
site, or a gateway to Internet commerce. And it will cost little
to promote the other sites, meaning most of the revenue for the
arrangements will go straight to Amazon.com's bottom line,
analysts said.
''This is almost pure-profit revenue flowing into the door,''
fund manager Cupps said. ''That goes a long way toward generating
gross margins and, ultimately, profits.''
Gross margin, which measures the profitability of sales, was
13 percent in the quarter. That figure should approach 20 percent
in the first quarter and widen the rest of the year, said Jenson.
Spending and Costs
The company has plenty of room to rein in costs, President
Joe Galli said. The company will lower its shipping costs, which
were inflated by free upgrades to meet holiday delivery deadlines,
and make its new, automated warehouses more efficient.
Amazon.com added 3.8 million customers in the quarter. It had
16.9 million customers at year-end, up from 6.2 million a year
earlier.
Amazon.com's stock has been volatile the past year, dipping
as low as 41 in August as the company added new product. The stock
soared 23 percent on the company's Sept. 29 announcement that it
would rent space to merchants on its zShops virtual mall.>>
-------------------------------------------------------
Many of the investors seem to believe this new Amazon pledge. Oh well, investors believe lots of things. Sometimes they are not true <VBG>...
Regards,
Scott
|
