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Earnings Calls: 
Amazon Earnings Call, Third Quarter 2006
Author: Rozalina Destanova
123jump.com
Last Update: 4:44 AM EDT July 07 2008

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Revenue grew 24% to $2.3 billion or 23%, excluding the $20 million favorable impact from year-over-year changes in foreign exchange rates. Worldwide unit growth was 22% or 24%, excluding Harry Potter 6 plus attachments. Active customer accounts surpassed 61 million, up 17%. Electronics and other general merchandise, or EGM, increased to $699 million, up 43%, or 41% excluding foreign exchange rates. For Q4, the company expects net sales of between $3.625 billion and $3.95 billion.


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Scott Devitt (Stifel Nicolaus): Related to the lower gas prices and on the consumer-facing side of your business, have you noted any short-term increase in consumer purchasing patterns that would have been reflected in your fourth-quarter guidance?

Tom Szkutak: I do not think we are a great bellwether for the economy. Any of the recent trends as well as the trends that we think will happen into the fourth quarter are reflected in our guidance.

Heath Terry (Credit Suisse): You have often talked about this ultimately being a 10% operating margin business. With all of the changes in the business over the years, as well as this focus on services, is that still the case or have those expectations changed?

Tom Szkutak: In terms of the first part of your question related to operating margins, the way we think about it, as a reminder, is we are trying to maximize free cash flow and free cash flow per share. So that is forefront what we are trying to do over the long term. As it relates to operating margins, it is difficult to see where they will end up. As we were talking about earlier as it relates to third-party mix, we are going to continue to add retail selection, we are going to continue to add third-party selection; and ultimately the customers are going to dictate what that mix will be, which will also certainly have an impact on our operating margins. That is how we think about it. Where we will end up is difficult to say. But whether it is a double-digit or a high-single digit is hard to say. Rur goal is to maximize free cash flow and free cash flow per share.

Heath Terry (Credit Suisse): As you have started to build out the supplier relationships and buying inventory for this holiday season, what your experience has been, particularly with regard to being able to get the type of inventory, hot toys and such that you would want and pricing that you would want for the business?

Tom Szkutak: We have been in the toy business for some time as a provider. We have also had, in terms of relationships, we have some relationships outside of the U.S. as we have toy categories launches outside of the U.S. In terms of getting into specific details, I do not think it is appropriate on a vendor by vendor basis or anything like that. We are pleased with the selection we have. We have added a lot of selection in a short period of time, over 125,000 unique items. Customers are going to benefit from that selection during fourth quarter. Prime customers will have the benefit of getting product, toys shipped quickly to their home or office or families. We also offer Free Supersaver Shipping. Which again, those are things that will be helpful to toy customers. We will continue to add selections over time in that category.
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