Amazon Posts Narrowing Loss and Falling Sales as AOL TW Invests $100m

24 July 2001

E-tail giant yesterday posted a narrower Q2 loss than expected and revealed that AOL Time Warner has bought a $100 million stake in the company.

Amazon reported a pro forma loss of $58 million, much less than the $80m forecast by analysts and an improvement on the $116m shortfall in Q2 2000. Chief financial officer Warren Jenson insisted that the group was on-course for pro forma profitability in the fourth quarter, though these results exclude costs such as stock options and debt interest payments.

However, Amazon also posted lower revenues than expected ($668m, compared to forecasts of $680m), and warned that sales for the rest of 2001 would also come in below predictions. It blamed the shortfall on its recent increase in new book prices and on the rising number of sales of used merchandise, for which Amazon acts only as an agent, incurring fewer costs but receiving only a 15% commission.

Amazon’s cash position will be affected by the drop in sales, though it insisted it would meet the previously forecast total of $900m in cash at year-end following the $100m investment by AOL TW.

The media group will acquire technology from Amazon to use on its own online shopping sites and pay to promote AOL TW services to the bookseller’s customers. However, Amazon has not agreed to purchase any extra advertising in AOL TW’s on and offline media.

News sources: New York Times; BBC Online Business News (UK)