January 19, 2001, 12:00 AM

Amazon: The Winner Still Loses

Despite 2.5 million new holiday customers and fourth-quarter sales that rose to a higher-than-predicted $650 million, Amazon.com continued to warn of substantial losses. The online retailer's stock dropped 14% on Wednesday morning, following the news.

Last year's fourth quarter sales jumped 150% from a year earlier, yet the company still expects to incur inventory-related charges and writedowns, "in part because we carried deep inventory in start-up businesses such as toys and electronics," says chief financial officer Warren Jenson.

The company also says 99% of holiday orders were shipped on time, a task that dipped further into coffers. "We went all-out to make sure we delivered for customers this holiday season," adds Jenson. As a result, higher seasonal sales "will not translate into lower net losses in the fourth quarter.".

Still the company exceeded analyst's expectations, who earlier predicted sales in the $516 million range.

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