Troubled Internet retailing giant Amazon.com faces a self-imposed deadline to turn a first-ever profit as the company struggles against flat sales numbers and skeptical analysts.
The success or failure of the venerable Internet store will be a landmark event in online retailing, which started with a bang but has now withered. Amazon was one of the first Internet retailers, selling books online in 1995. The company now sells, besides books, CDs, videos, electronics, tools and a number of other consumer goods.
Amazon's CEO Jeff Bezos, who was once named Time magazine's Man of the Year, promised earlier this year that the Seattle-based company will finally become profitable, at least using the company's own "pro forma" measures -- excluding a number of expenses -- by the end of 2001.
But during Tuesday's third quarter results, Amazon executives warned that sales growth would continue to slow into the crucial Christmas holiday season -- a forecast which prompted Merrill Lynch's influential analyst Henry Blodget to downgrade his advice on the company's shares to a "neutral" from an "accumulate" grade.
"The company continues to make progress towards profitability, but revenue growth continues to decelerate," Blodget said in a note to investors.
"With little visibility into 2002 ... and the prospect for additional declines in the core business, the stock appears expensive."
That is a stark change from when Blodget claimed during the Internet boom for two years ago that Amazon's stock was worth around US$400 per share.
On Thursday, Amazon shares were hovering around US$7.60. The company has a 52-week share price high of US$40.87.
With other big online retailers dropping like flies, Amazon has survived but its future remains uncertain as it continues to bleed cash.
The company has reached agreements with brick-and-mortar retailers such as Toys R Us and Borders Books to handle their online operations, which may give it some insulation from the problems of Internet retailing.
But analysts say that the fall in consumer confidence following the Sept. 11 terrorist attacks is likely to cause further turmoil among retailers.
Amazon executives predict sales for the three months to December, from which it derives the bulk of its revenues, are expected to come either flat or up to 10 percent higher than last year's US$972 million.
That is down on its previous forecast of a 10 to 20 percent rise, and lower than the US$1.099 billion Wall Street analysts were expecting.
Those numbers have forced Amazon executives to hedge on their profit promises. Warren Jenson, Amazon's chief financial officer, said that while the company continues to move towards profit "there are no guarantees."
There are some reasons for optimism. Research group GartnerG2 predicts online holiday retail sales worldwide are expected to grow 39 percent this year.
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