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Thu, Oct 27, 2005 - Page 12 News List

Amazon says profits down, but Potter increased revenue

NY TIMES NEWS SERVICE , NEW YORK

Amazon.com, the online retail company, reported on Tuesday that its profit declined in the third quarter, partly as a result of a legal settlement, while sales of the latest Harry Potter book helped increase revenue by 27 percent.

The company's net income fell some 44 percent in the period, to US$30 million, or US$0.07 a share, compared with US$54.1 million, or US$0.13 a share, a year earlier. Sales rose 27 percent, to US$1.86 billion from US$1.46 billion a year earlier, and were largely in line with forecasts. Amazon said it sold more than 1.6 million copies of the sixth installment of the Harry Potter series, Harry Potter and the Half-Blood Prince, which was released during the quarter.

But the company's outlook for the fourth-quarter holiday season was cautious, stoking investors' concern that its growth might be slowing in the face of high costs and increased competition.

Executives said Amazon invested in new warehouses, hired additional software engineers and expanded the selection of products available through the site.

Safa Rashtchy, an analyst with Piper Jaffray, said investors' hopes were high after Amazon's strong performance in the second quarter. But its heavy spending continued to take a toll on operating margins, disappointing some investors.

"It's not a disaster, but it's a bit of a letdown," Rashtchy said.

The company said it expected revenue of US$2.86 billion to US$3.16 billion in this quarter, typically Amazon's strongest, an increase of 13 percent to 24 percent from the fourth quarter last year.

"We're cautiously optimistic about Q4," said Thomas Szkutak, Amazon's chief financial officer, in a media conference call with analysts.

"It is, however, a seasonal quarter and hard to predict," he said.

Szkutak said that this would be Amazon's first holiday season since it began offering Amazon Prime, a US$79 fee for two-day shipping of all products a customer buys in a year.

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