Amazon profit falls

LOS ANGELES - Online retailer Amazon.com Inc on Tuesday posted a lower quarterly profit and forecast sales below some Wall Street expectations, stoking concerns about the pace of growth and sending shares down more than 7 per cent in after-hours trading.

The company offered a cautious revenue outlook for the critical holiday shopping season in the fourth quarter. The midpoint of Amazon's forecast revenue range, US$3.01 billion ($4.31 billion), was below the Wall Street consensus of US$3.08 billion.

Analyst Martin Pyykkonen of Hoefer & Arnett said Amazon's fourth-quarter guidance was driving down the company's stock.

"It confirms what I've been thinking about revenue deceleration," Pyykkonen said.

Amazon said third-quarter net income fell to US$30 million, or 7 cents per share, compared with US$54 million, or 13 cents per share a year earlier. On that basis analysts on average were expecting earnings of 9 cents per share, according to Reuters Estimates.

Excluding the impact of a US$40 million legal settlement - US$20 million after tax - the company said net income would have been US$50 million, or 12 cents per share.

Revenue grew to US$1.9 billion, from US$1.5 billion a year earlier, as sales in North America sales rose 28 per cent and the company sold more than 1.6 million copies of "Harry Potter and the Half-Blood Prince."

Investors have worried that increased competition and fewer opportunities to expand product lines are cutting into margins at the online retailer.

Amazon is valued at a price to projected 2006 earnings per share of 46, below that of online rival Yahoo Inc at 47, but at a premium to eBay Inc at 39.

Brick-and-mortar retailers, by contrast, trade at lower projected price-to-earnings ratios, with Wal-Mart Stores Inc at 17 times projected 2006 earnings per share and Target Corp at 21.

Looking ahead, the company said it expects fourth-quarter sales to be between US$2.86 billion and US$3.16 billion. It forecast full-year net sales at between US$8.37 billion and US$8.67 billion.

Analysts on average were looking for fourth-quarter revenue of US$3.08 billion in a range between US$2.90 billion and US$3.22 billion. For the full year, the Wall Street target was for revenue to range from US$8.38 billion at the low end to US$8.69 billion.

Shares fell US$3.46 or 7.49 per cent to US$42.71 on Inet after the results were announced.

- REUTERS