Amazon Lowers Expectations, Stock Drops 20%24 Jul, 2001 By: Hive News
Amazon.com's caution flag dropped on Monday caused the online retailer's stock to drop 20% on Tuesday, after the profit-starved company cautioned that it would see lower-than-expected revenue in the coming months.
Amazon's shaky revenue outlook was revealed as the company reported second-quarter earnings that beat Wall Street's expectations, and also announced a deal with AOL Time Warner to help it build a Web site for America Online's 30 million users.
The Seattle online retailer said Monday that it expects net sales for the third quarter to be around $625 million to $675 million, a drop from analysts' expectations of around $700 million to $725 million.
Amazon also said it expected net sales for the entire year to increase by between 11% and 16% over 2000 figures; it had previously forecast an increase of 20% to 30%.
The news sent Amazon shares down $3.97 to close at $12.06 in trading Tuesday on the Nasdaq Stock Market.
Jeff Bezos, Amazon.com's c.e.o., said the deal with AOL was aimed at providing "platform services" to companies such as AOL, Borders.com and Toys 'R' Us, and is simply an extension of Amazon's customer service credo. "It really is about building out consumer services," Bezos said in a conference call to analysts.
The AOL deal will have little immediate impact on Amazon's bottom line since AOL won't begin to pay Amazon until late 2002, when the new venture launches.
Scott Reamer, an analyst with SG Cowen Securities, told the Associated Press, "No matter how hard they work, they may not be able to get back to meaningful revenue."
Under the AOL deal, Amazon will promote certain AOL Time Warner products on its Web site and receive "multiple payments over multiple years." Amazon c.f.o. Further details of the financial arrangement were not available.
AOL also made a $100 million cash investment in Amazon.
AOL c.e.o. Barry Schuler said the company decided to let Amazon build its e-commerce site because AOL did not want to venture further into the e-commerce business. "We're going to partner as much as we can, to get the best products and services," Schuler told the AP.
For the quarter ended June 30, Amazon reported a net loss of $168.4 million, or 47 cents a share, compared with a loss of $317.2 million, or 91 cents a share, in the same period last year.
The company reported a pro forma net loss -- excluding costs such as stock options and losses from investments -- of $57.5 million, or 16 cents a share, less than half the loss of $115.7 million, or 33 cents a share, in the same period last year. Analysts were expecting a comparable net loss of 22 cents a share.
Second-quarter sales were $667.6 million, compared with sales of $577.9 million in the second quarter of 2000.
Amazon c.f.o. Warren Jenson said Amazon was still on track to show pro forma operating profitability by the fourth quarter of this year, but added, "We don't have a crystal ball on the economy." The company has never reported a profit.