Amazon Reaches New Deal With AOL | Adweek Amazon Reaches New Deal With AOL | Adweek
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Amazon Reaches New Deal With AOL

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SEATTLE -- Amazon.com Inc. posted a narrower-than-expected loss from operations in the second quarter and said it remains on track to post its first profit from operations in the fourth quarter.

The company also announced an expanded alliance with AOL Time Warner Inc., under which AOL will buy $100 million in Amazon stock.

The Internet retailer reported a net loss of $168.4 million, or 47 cents a share, compared with a year earlier net loss of $317.2 million, or 91 cents a share. Excluding acquisition-related expenses, stock-based compensation and noncash investment loss and gains, Amazon said it would have lost 16 cents a share, compared with a year-earlier loss from operations of 33 cents a share.

Revenue rose 16% to $667.6 million.

When the company reported its first-quarter results in April, Amazon said it expected second-quarter sales of $650 million to $700 million, with gross profit margin between 23% and 26% and a loss from operations to be flat to slightly improved from the first quarter's loss of 21 cents a share. Analysts at that time were expecting the company to post a loss from operations of 25 cents a share on revenue of $683.6 million.

The gross margin came in at 32%.

Amazon said in a prepared statement Monday that its U.S. operations posted a profit from operations for the first time, with earnings being $2 million compared with a year-earlier loss from operations of $55 million.

Going forward, Amazon is expecting third-quarter sales of $625 million to $675 million, a gross profit margin of 24% to 27% and loss from operations "flat with to very slightly down from the second quarter," the company said. The Thomson Financial/First Call estimate was for a loss of 20 cents a share.

In addition to posting earnings from operations, Amazon is forecasting fourth-quarter sales to be 10% to 20% above the year earlier's $972.4 million.

The alliance between Amazon and AOL is a new multiyear contract to develop and offer online-shopping services. Financial terms beyond the investment in Amazon weren't disclosed.

The companies said in a prepared statement that the new agreement expands on the marketing pact begun between the firms in 1997. The result will be a "multi-merchant e-commerce experience for users of Shop@AOL" through America Online, CompuServe and Netscape.com "beginning in the 2002 holiday shopping season." The statement noted that AOL members spent $7.8 billion shopping online in the second quarter.

In addition, Amazon.com will promote AOL as its exclusive Internet-service provider, as well as "promote an online boutique offering a variety of AOL Time Warner products and services, including service subscriptions." Amazon and AOL already have a promotional alliance.

Amazon will continue to own and operate its technology while providing AOL subscribers with search results, personalization features, product comparisons, ratings and reviews.

Copyright (c) 2001 Dow Jones & Company, Inc.