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The Honolulu Advertiser
Posted on: Wednesday, July 24, 2002

Amazon.com losses less than expected

By Helen Jung
Associated Press

SEATTLE — Amazon.com announced yesterday it nearly halved its net loss for the second quarter, crediting sales growth and lower operating expenses to helping it surpass Wall Street's expectations.

The Seattle-based Internet retailer also said it will report stock options as an expense on financial statements by January 2003. The move is a major departure for the company that has championed the use of "pro forma" accounting figures — which exclude such non-cash and one-time items as restructuring costs — as a fair measure of a company's progress.

For the three months ended June 30, the company reported a loss of $94 million, or 25 cents a share, compared with a net loss of $168 million, or 47 cents a share for the same period a year ago.

Excluding restructuring and other one-time charges, Amazon.com reported a pro forma net loss of $4 million, or 1 cent a share, compared with $57.5 million, or 16 cents a share for the second quarter a year ago.

On that basis, analysts polled by Thomson Financial/First Call were expecting a loss of 6 cents a share.

Revenues for the quarter grew nearly 21 percent to $806 million, topping expectations, compared with $668 million for the same period a year ago.

Amazon.com chief executive Jeff Bezos said that price cuts on books and shipping proved popular.

In addition, he said the company is changing how it lists stock options in part because employees' interests will be more in line with shareholders if options are treated not as a special expense, but rather a regular cost of doing business.

He added that it protects employees from some of the volatility associated with Amazon.com's stock, allowing for example, employees to purchase shares at a price that has been averaged over 30 days as opposed to tied to the day they start work.

"The best thing about expensing stock options is that it opens the door to more ... carefully crafted equity incentives," Bezos said.

Amazon.com spokesman Bill Curry said the motivation to change its reporting was not tied to some advocates calls for new requirements that companies list stock options as expenses.

Still, Amazon shares fell sharply. The shares, which closed the regular session down 95 cents at $14.55, fell another 83 cents, or nearly 6 percent, in the extended session.

The company also increased its range for third-quarter net sales to fall between $780 million and $830 million and pro forma operating income between $8 million and $17 million for the quarter.