Amazon's 4Q Profits Drop, But Still Exceed ExpectationsAmazon's 4Q Profits Drop, But Still Exceed Expectations

SEATTLE (AP)--Amazon.com reported a 40% drop in its fourth-quarter profit, but beat analysts' expectations as the Seattle-based Internet retailer said it plans to make its free-shipping experiment a permanent promotion.

The company also raised its sales outlook for this year, estimating that revenues will grow by 15%, up from the company's previous goal of a 10% increase.

For the three months ended Dec. 31, 2002, Amazon reported net income of $2.6 million, or a penny a share, compared to $5.09 million, or a penny a share for the same period a year ago. It was its second quarterly profit.

The company reported record revenue of $1.43 billion, up 28% over a year ago.

Excluding charges such as stock-based compensation and restructuring costs, the company reported a pro-forma profit of $75 million or 19 cents per share.

Analysts polled by Thomson First Call had been expecting pro-forma earnings of 14 cents a share on revenue of $1.39 billion.

Shares of Amazon closed up 62 cents to $21.79 a share in trading on the Nasdaq Stock Market Thursday, but dropped 27 cents in extended trading after the news was released.

The company blamed currency exchanges and other non-cash charges for the drop in net income.

Amazon had been offering free shipping on orders of $25 or more since last fall.

"We're at a tipping point," said Amazon chief executive Jeff Bezos. "Customers are now shopping at Amazon.com as much for our lower prices as for our selection and convenience."

The promotion cost the company more than $30 million in the fourth quarter, but drove sales up, said Amazon chief financial officer Tom Szkutak.

For the next quarter, Amazon.com said it expects sales to be between $1.025 billion and $1.075 billion, with a pro forma profit of between $5 million and $20 million.

For all of 2003, it expects sales to grow more than 15% and pro forma profit to be more than $115 million, or more than 27 cents a share.

For 2002, Amazon reported a loss of $149.1 million, or 39 cents a share, down 74% from the previous year's loss of $567.3 million, or $1.56 a share. Excluding certain charges, the company reported a pro forma net profit of $66 million, or 17 cents per share, compared to a pro forma net loss of $157 million or 43 cents a share in 2001.

Sales for 2002 were $3.93 billion, up 26% from $3.12 billion a year earlier. Analysts had forecast 2002 pro forma earnings of 12 cents a share on revenue of $3.9 billion.