Amazon makes money - dot-coms sigh with relief

Amazon.com has given a timely fillip to the e-tail industry by proving that it is possible to make money online.

In its fourth quarter results, released earlier today, the book seller and industry bellwether made a net profit of $5m for the period ending 31 December 2001, compared with a loss of $545m in the same period the year before.

The e-tailer can now breathe a huge sigh of relief, having made a very public promise to make money last year.

It even outstripped its own growth expectations. After its third quarter results it cautiously said it would grow at around 10 per cent, having previously stated it could achieve a figure as high as 20 per cent. It actually came in at 15 per cent.

Industry watchers have welcomed the results, which were better than most predicted. But Amazon could not afford to fail: had it done so, serious questions regarding the validity of its business model would have been asked.

Amazon still has some hefty debts, which stand at about $2bn, the interest on which costs the company about $120m a year in interest alone.

As a result it will have to cut costs further this year. It is facing growing competition and can't afford to increase its revenues through price hikes.

Dan Stevenson, an analyst at Jupiter MMXI Research, suggested that the e-tailer will have to continue to battle costs and avoid external spending sprees.

Rebecca Ulph, analyst at Forrester Research, agreed - but was keen to point out that Amazon has been lucky. "Cost-cutting is a long term goal. However, in the physical world, financial backers would have pulled out a long time ago."

Amazon said international sales in France, Germany, Japan and the UK grew 81 per cent.

Ulph added: "This is proof from the big, mass-market players that people are transacting on the internet."