Amazon Focuses on Revenue

By Yuki Noguchi
Washington Post Staff Writer
Wednesday, October 25, 2006

Internet retailer Inc. yesterday posted a smaller profit on a 24 percent increase in revenue in the third quarter, citing increased spending on technology and content that it hopes will generate sales in new niches.

Amazon's profit has declined steadily for most of the past 2 1/2 years as it invested in a bevy of new services, such as its recently launched Unbox, an online digital video download store.

During the three months ended Sept. 30, Amazon reported profit of $19 million (5 cents a share) on revenue of $2.31 billion. That compares with a profit of $30 million (7 cents) on revenue of $1.86 billion in the corresponding period last year.

Amazon's announcement came after the market closed. Shares of Amazon closed yesterday at $33.63, up 75 cents.

Amazon reported that expenses for technology and content in the third quarter totaled $172 million, up 42 percent over the $121 million it spent in those areas in the third quarter last year.

Amazon's expenses have been climbing as it invests in new lines of business to compete with other Internet merchants and the online divisions of retailing giants such as Wal-Mart Stores Inc. It just added auto parts and accessories to its main site and introduced a health and beauty area on its Japanese site in August.

Amazon's revenue has been rising, too, with help from such initiatives as a subscription that gives members free two-day shipping on eligible items for $79 a year.

Jeffrey P. Bezos, the firm's founder and chief executive, said in a statement yesterday that he was pleased with the "rapid adoption" of the service.

The third-quarter revenue growth impressed analysts.

"You have a case of accelerating growth, which you never expected out of Amazon," one of the Internet's older and larger companies, said Rick Munarriz, senior analyst with the Motley Fool Inc., an investment advisory site.

It's too early to know whether the company's various investments will pay off, Munarriz added. He noted that Amazon recently yanked some of the unusual features it had pioneered with its A9 search engine.

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