What's New @ Amazon.com? Computers!

Promising shareholders a “pro forma” profit for fiscal 2002, Amazon.com (Seattle) has entered the personal computer business. The online pioneer – successful, originally, selling books, but less successful in other product areas — will begin selling PCs in the second half of the year. The company noted that while computer sales at traditional bricks-and-mortar stores have slipped, online sales have grown 77 percent from a year ago. Amazon also expects that its entry into the PC segment will boost its sales of related merchandise, such as digital cameras, disc drives, memory and other computer add-ons.

Unlike the case in most of its other product categories, Amazon expects to hold no computer inventory in its own warehouses. Rather, it will have the machines shipped directly from a computer distributor. This is not the model of most other online computer companies (e.g., Dell Computer), which make and sell their own equipment. Other companies to try the “virtual inventory” structure, such as Buy.com, have found profitability elusive.

The expectation of “pro-forma profitability” made by cfo Warren Jenson means the company will not count certain costs – such debt interest and charges associated with acquisitions – in determining year-end gains and losses.