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Amazon Out Of The Woods

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Adrian Roselli

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User since: 14 Dec 1998

Articles written: 85

Back on January 21, Amazon had expected to report its first profit — a pro forma profit that would exclude many costs included in regular accounting and is often seen as a controversial method of creating good news where there may be none. Amazon has maintained that pro forma accounting is more appropriate for its business model.

However, Amazon posted a $5 million (1 cent per share) profit the very next day using standard accounting methods. Amazon used GAAP (Generally Accepted Accounting Principles), which is considered quite an accomplishment for a company often viewed as the poster boy for creative accounting.

Wall Street tracking firm Thomson Financial/First Call had expected Amazon to post a pro forma net loss of between 4 and 8 cents a share, compared to a loss of 25 cents a share ($90 million, pro forma) a year ago. Amazon's GAAP losses last year were $545 million, or $1.53 per share.

Amazon was able to cut its operating costs in half this past quarter, which allowed for lower prices on core products, resulting in higher sales volume. Free shipping on orders over $99 (originally a holiday special, but permanent as of today) as well as bundled products are credited with some of that volume, according to Bezos. Licensing its e-commerce package to Target and Toys R Us probably hasn't hurt, either. International sales were up 81% from last year, with the Germany and United Kingdom offices breaking even.

Amazon is still in debt to the tune of $2.2 billion ($120 million a year in interest alone), although that debt does not come due until 2008. Amazon is projecting first quarter sales between $775 million and $825 million, with $810 million in liabilities in the fourth quarter, meaning that profit is already earmarked and unable to pay down its debt.

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A founder of, Adrian Roselli (aardvark) is the Senior Usability Engineer at Algonquin Studios, located in Buffalo, New York.

Adrian has years of experience in graphic design, web design and multimedia design, as well as extensive experience in internet commerce and interface design and usability. He has been developing for the World Wide Web since its inception, and working the design field since 1993. Adrian is a founding member, board member, and writer to In addition, Adrian sits on the Digital Media Advisory Committee for a local SUNY college and a local private college, as well as the board for a local charter school.

You can see his brand-spanking-new blog at as well as his new web site to promote his writing and speaking at

Adrian authored the usability case study for in Usability: The Site Speaks for Itself, published by glasshaus. He has written three chapters for the book Professional Web Graphics for Non Designers, also published by glasshaus. Adrian also managed to get a couple chapters written (and published) for The Web Professional's Handbook before glasshaus went under. They were really quite good. You should have bought more of the books.

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