After Turning a Profit, Jeff Bezos Has Reason to Laugh Again

SEATTLE – In the early days of dot-com bubble, Amazon.com's Jeff Bezos was a business visionary with a Midas touch. Then the bubble burst, and Bezos spent much of 2001 defending his pioneering — but never profitable s Internet retailer.

This week, Amazon surprised naysayers by turning its first profit for the fourth quarter of 2001, an unexpected event that has Bezos back in Wall Street's adoring spotlight.

Asked if he feels vindicated, Bezos barks out his famously rambunctious laugh.

"In general, people overreacted as much in 2000 and early 2001 as they overreacted in 1999," he said in an interview with The Associated Press. "In 1999, the Internet was going to take over the world, and in 2000 the Internet was dead. So hopefully we're moving into a phase where people are going to be much more balanced."

But, in a sign of the post-boom times, he quickly gets serious.

"We've got a lot of work to do," he said. "We've been working hard for six years, and we'll be working hard for the next six years and the next six years after that."

This isn't just cheap talk. Although the company surprised even its more ardent supporters by making money on strong holiday sales here and internationally, it also cautioned not to expect a repeat performance soon.

For the current quarter, the world's largest Internet retailer said it may break even on a pro forma operating basis, which doesn't count such costs as stock options, losses from investments and restructuring charges. It hasn't said when it expects to turn a net profit again.

Analysts say the dip is expected, a product of both the weak economy and the seasonality of retail. But it also shows that Amazon still has a long way to go.

"They're pretty much on first base and they need to continue to focus on profitability and make this a home run," said Kristine Koerber, an analyst with WR Hambrecht + Co.

But both Wall Street watchers and Bezos said such strong performance last quarter proves the viability of Amazon's twin philosophies for success on the Internet — which Wall Street first praised and then derided.

The first: grow quickly at the expense of immediate profits.

The second: offer an extremely wide selection — from paint to books to food processors — at low prices.

"That's what we've been doing for six years and that's what is finally paying off at this point," Bezos said.

Still there was some welcome tweaking to Amazon's business ways in the past year.

After years of growth, Amazon curtailed expansion and expenses considerably in 2001, including laying off more than 1,000 workers and closing some operations. Analysts say Amazon will have to continue to pinch pennies if it wants to keep impressing Wall Street.

"There's still plenty of room for cost-cutting," Koerber said.

This year, Amazon also saw huge growth in its used-item sales and forged several high-profile partnerships with established brick and mortar retailers such as Target and Borders.

Although the company doesn't expect to immediately make a lot of money off those partnerships, Bezos said the company will continue to pursue such deals.

In many ways, the partnerships take the place of Amazon's early -- and failed — strategy of expanding selection by investing in other start-up Internet retailers such as Pets.com and furniture company Living.com.

Bezos said those failed investments were borne out of the "land rush" mentality of the Internet.

"We had the point of view that if we're not going to ourselves get into the furniture business (we better invest) in a company very, very quickly now or forego the opportunity forever," Bezos said. "That turned out to be wrong."

But Bezos insists that's one of the company's few missteps. The strategy for Amazon.com's future will be much like its strategy in the past, he said. Expect the company to lower prices whenever possible, and increase selection as much as it can.

"The big challenge is continuing to stay heads-down focused on the customer experience," he said. "As things change in the external world, we don't get distracted."

Analysts also caution that the company shouldn't get too distracted by deals such as the outside partnerships. While they will prove important in the long-term, analyst Dan Geiman of McAdams Wright Ragen says the company's bread and butter continues to be selling books, music and videos. He's hoping the company will place more emphasis on growth in that and the company's electronics, tools and kitchen products sales.

"They've certainly piqued investors' interest once again," he said, "but they've gotta keep performing."