Amazon.com’s Stock Surges on News of Smaller Loss

Amazon.com said Monday its first-quarter loss would be smaller than Wall Street had expected, easing fears of a cash crunch and sending the biggest Internet retailer’s stock up 34%.

The Seattle-based company said it lost less than $255 million in the first three months of the year, an improvement from its $308-million loss a year earlier.

After taking out merger, restructuring, some compensation and other costs, Amazon said its pro forma net loss would be about 22 cents a share, compared with 35 cents a year earlier and the 30-cent average pro forma loss estimate by analysts.

“Fears of a liquidity squeeze for Amazon, if not eradicated, were at least assuaged” by the preliminary results, said Bear, Stearns & Co. analyst Jeff Fieler. Amazon’s full quarterly results will be released April 24.

Amazon’s shares, which dove 83% in the last year, gained $2.81 Monday to close at $11.18.

The company said sales in the first quarter grew more than 21% to $695 million, beating expectations of about $670 million. Amazon said the sales growth was driven by rapid expansion in its international and consumer electronics businesses.

Analysts said Amazon also benefited from the demise of smaller Internet companies. “You have a much more benign competitive atmosphere,” he said. “The marketing noise of competitors is a lot smaller than in the past, and they’re not pricing as aggressively.”

Amazon’s report was a rare bit of good news among technology and other companies warning of surprisingly poor results.

But Amazon still faces huge problems, particularly slow growth in its core business of selling books, music and videos to U.S. consumers.

“What concerns us is that in the profitable segment of their business, growth has slowed to almost nothing, and the unprofitable segments of their business is growing very rapidly,” said Prudential Securities analyst Mark Rowen, who kept his “sell” recommendation on the stock. “Unless they can show us they’re turning that business around, we believe this will catch up with them.”

The forecast heightens the prospects for Amazon actually turning a profit, an issue that has become a major concern for investors who have witnessed a slew of closures and bankruptcies from many other Web retailers, such as EToys Inc.

“This is probably the best quarter in our history,” Amazon Chief Financial Officer Warren Jenson said in an interview. “We recognize we have a lot to do, but the trends are pretty clear.”

Earlier this year Amazon said it would cut 1,300 jobs, or 15% of its work force, to cut costs.

Jenson said Amazon still plans to deliver on Chief Executive Jeff Bezos’ promise to turn a pro forma operating profit by the end of this year. The company’s operating loss in the quarter is expected to be slightly less than $50 million.

“Our goals remain absolutely unchanged,” Jenson said, but added, “There are never any guarantees in life.”

Amazon also said Monday it expected to report having cash and marketable securities of $640 million on hand at the close of the first quarter, about $10 million short of its earlier projections.

Analysts said Amazon has enough cash to make it at least into next year unless vendors tighten up credit in the second half of this year. Monday’s announcement makes that somewhat less likely.

But a cash squeeze “is still not out of the realm of possibility,” Rowen said.

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Reuters was used in compiling this report.