July 27, 2005

According to a company statement released yesterday, Amazon's net earnings were up sharply in the second quarter, both in the U.S. and abroad, as electronics and other merchandise made up more and more of its business. Revenue was at $1.76 billion in the latest quarter that ended June 30, up 26.1 percent from $1.4 billion when compared to 2004's second quarter.

Amazon's international sales, including its U.K., French, German, Japanese and Chinese units, rose 32.9 percent from a year earlier, to reach $793 million.

The pioneer in online bookselling saw sales of electronics and general merchandise, distinct from books and other media, grow to 26% of its worldwide sales from 23% a year earlier.

Net income declined to $52 million from $76 million in the second quarter of 2004, including $56 million in income tax expense, which was up from $5 million a year earlier.

Amazon's earnings were 12 cents per share, down from 18 cents per share in last year's second quarter. However, that figure beat financial analysts' consensus estimate of 10 cents per share, according to Thomson First Call. Amazon also slightly exceeded the consensus estimate of revenue, which was $1.73 billion.

The decline in net income in the quarter was primarily the result of the increased tax expense, Tom Szkutak, senior vice president and chief financial officer, said in a conference call after the earnings announcement.

International sales make up a gradually growing share of Amazon's revenue. In the 12 months that ended June 30, they accounted for 45% of net sales, up from 42% in the year that ended on June 30, 2004.

For the third quarter, Amazon expects revenue between $8.275 billion and $8.675 billion, representing growth of between 20% and 25% from last year's third quarter.

The biggest product introduction in Amazon's history, the release of the book Harry Potter and the Half-Blood Prince, hit on July 16.

Amazon received more than 1.5 million preorders of the book, the company said. Because of the price it charged and the cost of the coordinated shipment of the eagerly awaited book, the company essentially broke even, but it hopes the experience turns young Harry Potter readers into happy long-term customers, executives said.

Customers have saved about $200 million on shipping by joining Amazon Prime, a paid membership program that gives users free two-day shipping and discounted overnight shipping, the company said. But Amazon is pleased with the results of the program so far and expects it to increase purchases by members, the executives said.

Source: ComputerWorld

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