This summary is based on the fourth quarter fiscal 2005 earnings call conducted by Amazon.com, Inc. (AMZN: chart) on February 2, 2006.

Management:

Vice President of Investor Relations: Tim Stone
Senior Vice President and Chief Financial Officer: Thomas J. Szkutak
Chairman and Chief Executive Officer: Jeffrey P. Bezos

Key Investors Issues

- EP[S were 47 cents per share compared to 82 cents per share last year.
- GAAP net income was $199 million compared to $347 million a year ago.
- Revenue grew 17% to $2.98 billion.

Fourth Quarter Highlights

Revenue grew 17% to $2.98 billion or 22% excluding $121 million of unfavorable year-over-year impact from foreign exchange.

- Worldwide unit growth was also at 22%.
- Third party units representing marketplace and merchandise units sold on Amazon sites were 28% of total units, up from 26%.

- For the first time North America Media surpassed $1 billion and North America Electronics and General Merchandise exceeded $500 million.
- The Worldwide Electronics and other General Merchandise increased 31% to $901 million or 36% excluding of that, representing 30% of worldwide sales, up from 27%.

- Active customer accounts, representing customers who ordered in the past year, surpassed 55 million, up 19%.
- Gross profit grew 23% to $667 million, and gross margin increased 98 basis points to 22.4% primarily due to increased third-party sales, changes in the geographic mix of business, and $19 million increase in other revenue primarily Amazon enterprise solutions formerly known as merchant.com, partially offset by greater shipping loss driven by free shipping in Amazon Prime, lower product prices and continued mix shift of EGM.
- The company offered free short-term membership trails for Amazon clients and although they are expensive the company expects to continue offering of these trails to customer base in the future.

Fulfillment, marketing, technology and content and G&A combined was $482 million or 16.2% of sales, up 175 basis points.

Fulfillment was $246 million or 8.3% of sales, up 26 basis points. In 2005, the company expanded its fulfillment capacity through efficiency gains as well as increases in leased warehouse space in order to accommodate greater selection and meet anticipated shipment volumes from the company itself as well as third parties for whom the company provides the fulfillment. In 2006, the company expects to increase performance base less than in 2005 to expand capacity to touch that peak demand.

- Marketing was $67 million or 2.2% of sales, flat as a percentage of sales year-over-year.
- Technology and content was $123 million or 4.1% of sales, up 127 basis points as the company continues to hire computer scientists and software engineers to further innovate for customers in areas such as Seller Platforms, Search, Web Services and Digital. The fourth quarter represents an annual run-rate of approximately $500 million as the company enters 2006. In 2006, the company will continue investing in long-term opportunities, innovating on behalf of customers. The company expect technology and content cost to continue to grow in absolute dollars, and 2006 year-over-year percentage growth rate to be lower in 2005. G&A was $46 million or 1.5% of sales, up 27 basis points. G&A cost increased primarily due to payroll and related expenses, professional fees and legal cost.

In the North America segment, revenue grew 21% to $1.7 billion.

- Media grew 16% to $1 billion, and EGM grew 29% to $580 million representing 34% of North America revenues, up from 32%.
- Apparels, Jewelry and Sporting Goods revenue all more than doubled year-over-year.
- Other revenue was up 25% primarily from Amazon enterprise solutions.

- Gross profit grew 18% to $418 million, and gross margin decreased 64 basis points to 24.8% largely due to Amazon Prime and free shipping products and service mix and price reductions across product categories partially offset by third party sales.
- North America segment operating income increased $30 million to $92 million or 5.5% operating margin.

In the International segment revenue grew 13% to $1.3 billion.

- Revenue growth was 23% adjusting for the $122 million unfavorable impact from foreign exchange during the quarter.
- Media revenue grew 6% to 968 million, or 16% excluding the foreign exchange rates.
- EGM grew 36% to $321 million or 49% excluding FX representing 25% of international revenues up from 21%.

- Gross profit grew 31% to $249 million of gross margin increase of 273 basis points to 19.3% primarily from an increase of third party sales and from vendor management including discounts from suppliers, partially offset by increased free shipping, product price reductions and product mix shift.
- International segment operating income increased $37 million to $93 million, and operating margin increased 233 basis points to 7.1%. The combination of operating income and North America and international segment is a consolidated segment operating income or CSOI. CSOI grew 4% to $185 million or 11% excluding this $12 million unfavorable year-over-year impact from foreign exchange rate. Unlike CSOI GAAP operating income includes stock-based compensation expense and other operating expense.
- GAAP operating income increased 1% to $165 million; excluding the $12 million impact from year-over-year changes in foreign exchange rates operating income increased 9% to a $176 million.

Positions for income taxes include a tax benefit of $90 million or 21 cents per share related to determination at certain of deferred tax assets are realizable.