Amazon.com Focuses On Profitability

Revenues in Amazon.com's book/music/video group rose 2% in the first quarter ended March 31, 2000, to $409.6 million, the slowest growth rate posted by the group to date. But company executives were quick to note that the group's gross profit increased 32%, to $109.1 million, and that the unit had a pro forma operating income of $27.6 million in the period compared to a pro forma operating loss of $2.4 million in last year's first quarter.

Amazon chief financial officer Warren Jenson said the sluggish revenue growth rate in the division was the result "of a specific decision to optimize profits," adding that the trend will likely continue into future quarters. Later in a conference call with analysts, Amazon CEO Jeff Bezos said that despite the recent slow growth, "no one should believe we are done with b/m/v growth," noting that the company is working on a number of initiatives to spur sales.

Both Bezos and Jenson said the company's primary focus for the year is to reach profitability, and Jenson stressed that the company is still on track to achieve pro forma profitability by this year's fourth quarter. Sales for the entire company increased 21.9% to $700 million in the most recent quarter, and the company's pro forma net loss fell from $99 million to $49 million. Amazon's actual loss was $234 million in the period, down from $308 million in last year's first quarter.

The fastest growth in the quarter was in the newly formed services group, which had an 85% sales gain, to $42.1 million. The services group includes revenues and costs associated with Amazon's business-to-business relationships, including its alliance with Toysrus.com, plus advertising revenues and proceeds from Amazon Auctions, zShops and Payments. Bezos said the company considers its e-commerce platform to be a "long-term business opportunity," and Amazon will continue to seek strategic partners (like Borders) for which it will develop customized Web sites.

Sales increased 76% in Amazon's international operations, highlighted by what Jenson termed "stunning" growth in Japan. Sales in the electronics, tools and kitchen segment rose 56%, to $116.5 million.