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Amazon Inching Toward Profitability

The online retailer looks good on a pro-forma basis, but it's still posting substantial losses when one-time expenses are included.
Amazon.com Inc. CEO Jeff Bezos, addressing the company's third-quarter loss of $170 million, insisted Tuesday that the online superstore was ready to meet its pledge for profitability in the final three months of the year.

Of course, he's talking pro-forma operating profitability. Measured in that sense, Amazon's results look almost rosy: The pro forma loss from operations for the quarter ended Sept. 30 shrunk 60% to $27 million, compared with $68 million a year earlier. The U.S. retail and services segments combined were profitable on a pro forma basis for the second straight quarter--to the tune of $1 million, compared with a loss of $29 million last year.

But back to the non-pro forma loss of $170 million, as computed according to generally accepted accounting principles: It was a 29% improvement from the $241 million loss a year ago, but $2 million worse than the $168 million it lost during the previous quarter. Net sales were basically flat--$639 million, compared with $638 million a year ago. One bright spot for the quarter: Sales of used merchandise, launched just 11 months ago, totaled 17% of all U.S. orders.

"To reach pro-forma profitability requires not heroics, just execution," CFO Warren Jenson said during a conference call. Jensen said net sales for the fourth quarter are expected to be between $970 million and $1.07 billion, compared with $972 million for fourth quarter of 2000. He expects revenue from services--fueled by partnerships with Target, Circuit City, and Expedia formed in the past three months--to exceed $200 million this year.