UPDATE 4-Amazon holiday profit beats, sees strong 1st qtr

* Q4 EPS 85 cents versus Street’s 72 cents

* Q4 revenue up 42 percent, beats estimates

* Sees Q1 revenue $6.45 bln-$7 bln vs view of $6.36 bln

* Sees Q1 operating profit $275 mln-$365 mln

* Shares up nearly 2 percent after-hours
(Adds detail throughout on overall sales, Zappos, Kindle, adds
analyst quotes)

By Alexandria Sage

SAN FRANCISCO, Jan 28 (BestGrowthStock) – Amazon.com Inc (AMZN.O: )
blew past analysts’ profit estimates in its closely watched
holiday quarter and forecast revenue for early 2010 that topped
already-high Wall Street expectations.

The world’s largest online retailer — which sells
everything from books to barbecues while offering a host of
services to businesses and Web developers — has been viewed as
a winner of a fiercely competitive 2009 holiday season.

Amazon, whose shares rose nearly 2 percent in after-hours
trade, has gained ground as more consumers turn to the Web for
bargains and has moved aggressively against retail juggernaut
Wal-Mart Stores Inc (WMT.N: ) in a battle for low-priced books,
toys and electronics.

Amazon’s growth “is not only intact and confirmed by the
earnings report, they continue to surprise with nice upside
beyond any reasonable expectations,” said Frederick Moran,
analyst at Benchmark Co.

“So far I see no chinks in the armor of Amazon’s earnings
report,” he said. “We’d be buyers of the stock.”

A sales revival in Amazon’s media category, its newly
acquired Zappos online shoe business, and sales from
third-party sellers who use Amazon’s site to sell their goods
also contributed to results.

“Amazon must be dramatically taking share,” wrote Citigroup
analyst Mark Mahaney in a note, calling fundamental trends
“clearly impressive.”

“Street numbers will likely go up … again,” he added.

Amazon also announced a $2 billion share repurchase with no
fixed expiration.

The company again cited the strength of its Kindle
electronic book reader, which has fascinated yet frustrated
Wall Street, given its apparent popularity but the lack of
disclosed sales data.

Amazon said it is now selling six Kindle e-books for every
10 physical books on its site in cases where it has editions in
both formats, excluding free downloads. It declined to give a
year-ago comparison.

AFTER-MARKET SHOCK

Fourth-quarter net profit jumped 71 percent to $384
million, or 85 cents per share, from $225 million, or 52 cents
per share, a year earlier.

Analysts, on average, had been expecting 72 cents per
share, according to Thomson Reuters I/B/E/S.

Revenue increased 42 percent to $9.52 billion — above the
$9.04 billion expected by Wall Street and the $9.13 billion
that was at the high end of Amazon’s own forecast.

Zappos, which Amazon bought in October, contributed $200
million of revenue in the quarter.

Investor response to Amazon’s numbers was strongly negative
at first, with its shares falling more than 7 percent and then
swinging more than 3 percent higher in a short period of time.

“Their gross margin was lighter in the quarter than I was
expecting but they offset that by just managing their operating
expenses,” said Hamed Khorsand, analyst with BWS Financial.
“People saw the gross margin number and that’s probably what
caused the stock to react negatively initially.”

Amazon’s quarterly gross margin was about 20.8 percent,
just shy of the 21 percent expected by Khorsand and up from
from 20.1 percent a year earlier.

“We were able to take that (revenue) growth and leverage
our cost structure,” Amazon Chief Financial Officer Tom Szkutak
told reporters during a media call.

That margin was eroded somewhat by lower price tags on
Amazon products in the competitive holiday sales environment,
but offset by growth in Amazon’s Web service business, savings
passed on from vendors and inventory management, Szkutak said.

Also on Thursday, rival Wal-Mart said it had created a new
division called Global.com to oversee its global e-commerce
business — suggesting the largest worldwide retailer plans to
accelerate growth of its online unit. [ID:nN28110298]

In Amazon’s media segment, which includes books, revenue
rose 29 percent in the fourth quarter.

“We haven’t seen that kind of growth in some time,” said
Scott Tilghman, an analyst with Hudson Square Research. “The
last time we were over 20 percent was in June of 2008.”

Revenue climbed 60 percent in the electronics and general
merchandise category. North American sales increased 36
percent, while international sales rose 49 percent, boosted by
favorable currency translations.

Amazon sees operating profit for the first quarter of 2010
of $275 million to $365 million, on revenue of $6.45 billion to
$7 billion, representing a 32 percent to 43 percent rise.

Analysts had been expecting revenue of $6.36 billion in the
first quarter.

Shares rose in after-hours trading to $128.35.

Investing
(Additional reporting by Martinne Geller, Lisa Baertlein and
Caroline Valetkevitch; Editing by Michele Gershberg and Steve
Orlofsky)

UPDATE 4-Amazon holiday profit beats, sees strong 1st qtr