Amazon spending threatens 1st-quarter profit

Tue Jan 31, 2012 7:42pm EST
 
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By Alistair Barr

SAN FRANCISCO (Reuters) - Amazon.com Inc warned of a possible operating loss in the first quarter following a sharp drop in fourth-quarter profit, a sign that the online retailer will keep spending heavily on expansion at the expense of short-term returns.

Shares of the company fell more than 8 percent.

Amazon forecast first-quarter operating results ranging from a loss of $200 million to a profit of $100 million, below Wall Street expectations.

Amazon has been growing at least twice as fast as the e-commerce sector in recent years. To keep up that pace, the company is expanding into new categories and regions, spending heavily on growth and crushing profit margins.

Amazon's first-quarter forecast suggests the company may continue this heavy investment.

"The wide range reflects the investments that we're making," Amazon Chief Financial Officer Tom Szkutak told reporters on a conference call. "We have a lot of opportunities to invest in .... You're seeing more of that in Q1."

'DIMINISHING RETURN'

Amazon's first-quarter revenue forecast also disappointed. The company said it expects sales of $12 billion to $13.4 billion in the period, while Wall Street was looking for $13.4 billion, according to Thomson Reuters I/B/E/S.   Continued...