Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Rob Eldridge - Vice President, Investor Relations

Thomas J. Szkutak - Chief Financial Officer, Senior Vice President

Jeffrey P. Bezos - Chairman of the Board, President, Chief Executive Officer

Analysts

James Mitchell - Goldman Sachs

Doug Anmuth - Barclays Capital

Scott Devitt - Stifel Nicolaus

Mark Mahaney - Citigroup

Justin Post - Merrill Lynch

Jeetil Patel - Deutsche Bank

Brian Pitz - Banc of America

Jeffrey Lindsay - Sanford C. Bernstein

Imran Khan - J.P. Morgan

Amazon.com, Inc. (AMZN) Q3 2008 Earnings Call October 22, 2008 5:00 PM ET

Operator

Good day, everyone and welcome to the Amazon.com third quarter 2008 financial results teleconference. (Operator Instructions) For opening remarks, I will be turning the call over to the Vice President of Investor Relations, Mr. Rob Eldridge. Please go ahead.

Rob Eldridge

Hello and welcome to our Q308 financial results conference call. Joining us today is Tom Szkutak, our CFO. Jeff Bezos, our Founder and CEO, and Tom will both be available for Q&A.

The following discussion and responses to your questions reflect management’s views as of today, October 22, 2008 only and will include forward-looking statements. Actual results may differ materially.

Additional information about factors that could potentially impact our financial results is included in today’s press release and our filings with the SEC, including our 2007 annual report on Form 10-K.

As you listen to today’s call, we encourage you to have our press release in front of you, which includes our financial results, as well as metrics and commentary on the quarter.

During this call, we will discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast, and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures.

Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2007.

Now I’ll turn the call over to Tom.

Thomas J. Szkutak

Thanks, Rob. I’ll begin with comments on our financial results. Trailing 12-month free cash flow increased 21% to $970 million. The combination of common stock and stock-based awards outstanding was 448 million shares compared with 435 million.

Return on invested capital was 32%, down from 42%. Worldwide revenue grew 31% to $4.26 billion, or 28% excluding the $80 million favorable impact from year-over-year changes in foreign exchange rates. In Q3 2007, worldwide revenue benefited by approximately 290 basis points of year-over-year growth from Harry Potter 7 sales plus attachments. Excluding Harry Potter 7 plus attachments and changes in foreign exchange rates, revenue growth was 31%.

Media revenue increased to $2.49 billion, up 19%, or 17% excluding FX.

EGM revenue increased to $1.64 billion, up 52% or 49% excluding foreign exchange rates. Worldwide EGM increased to 38% of worldwide sales, up from 33%.

Worldwide unit growth was 30% or 32% excluding Harry Potter 7 plus attachments.

Prime membership increased more than 70% from the prior year and Amazon premium, the French version of Amazon Prime, launched on October 1st. We expect more customers to save time and money by using Amazon Prime to ship their gifts to friends and family this holiday season.

Active customer accounts exceeded 84 million, up 17%. Worldwide active seller accounts were more than 1.4 million, up 17%. Seller units were 31% of total units, unchanged from the prior year.

Worldwide gross profit was $999 million, up 31%.

We recently lowered the free shipping threshold from 15 pounds to 5 pounds in the U.K. Super Save shipping is an important component of our overall value we provide and customers have save more than $700 million with our free shipping offers over the past 12 months.

Now I’ll discuss operating expenses excluding stock-based compensation. Fulfillment, marketing and technology and content and G&A combined was $768 million, or 18% of sales, up 8 basis points year over year. Fulfillment was $378 million, or 8.9% of revenue, compared with 8.7%. We opened new fulfillment centers in Arizona, Indiana, and Pennsylvania to support continued expansion of selection and customer demand.

Technology and content was $226 million, or 5.3% of revenue compared with 5.6%.

Now I’ll talk about our segment results and consistent with prior periods, we do not allocate the segments for stock-based compensation or other operating expense.

In the North America segment, revenue grew 29% to $2.3 billion. Media revenue grew 15% to $1.25 billion. Kindle selection continues to grow. Since inception, we have more than doubled the number of books, magazines, newspapers, and blogs available to be delivered wirelessly in less than one minute. Kindle titles already account for more than 10% of unit sales for books that are available in both digital and print formats. We’ve ramped up manufacturing capacity over the past 10 months and Kindles are in stock and available for immediate shipment. Kindle sales since launch have significantly exceeded our expectations. We will not introduce the new version of the Kindle until next year at the earliest.

EGM revenue grew 51% to $950 million, representing 41% of North America revenues, up from 35%.

North American gross profit grew 28% to $586 million and gross margin decreased 24 basis points to 25.5%, driven by lower prices for our customers, including free shipping offers in Amazon Prime, and changes in product mix, partially offset by higher other revenue.

North America segment operating income increased 12% to $88 million, a 3.8% operating margin.

In the international segment, revenue grew 33% to $1.96 billion. Revenue growth was 28%, adjusting for the $80 million year-over-year favorable FX impact during the quarter.

Media revenue grew 24% to $1.25 billion, or 18% excluding FX, and EGM grew 54% to $690 million, or 48% excluding FX. EGM now represents 35% of international revenues, up from 30%.

International gross profit grew 37% to $413 million, or grew 32% excluding FX, while gross margin increased 53 basis points to 21.1%, driven by increases in 3P, product sales, and improvements in vendor pricing, partially offset by lower prices for our customers and changes in product mix.

International segment operating income increased 46% to $143 million, a 7.3% operating margin. Excluding the favorable impact from FX, international segment operating income increased 39%.

CSOI grew 31% to $231 million, or 5.4% of revenue, unchanged year over year. Excluding the $5 million favorable impact from FX, CSOI grew 28%.

Unlike CSOI, our GAAP operating income includes stock-based compensation expense and other operating expense. GAAP operating income grew 26% to $154 million, or 3.6% of net sales.

Our income tax expense was $59 million in Q3, or a 33% rate for the quarter. We estimate our effective tax rate in 2008 will be approximately 28% and that cash taxes paid will be less than $75 million. However, there is potential for significant volatility due to several factors, including variability in accurately predicting the amount and mix of taxable income by jurisdiction and business acquisitions or investments. We are endeavoring to optimize our global taxes on a cash paid basis, not for tax expense on a financial reporting basis.

GAAP net income was $118 million, or $0.27 per diluted share compared with $80 million and $0.19 per diluted share.

Turning to the balance sheet, cash and marketable securities increased $416 million to $2.32 billion year over year. Our cash and marketable securities primarily consists of cash, government agency securities, triple A rated money market funds, and other investment grade securities. Such amounts are recorded at fair value.

Inventory increased 36% to $1.32 billion and inventory turns were 12.4, unchanged from the prior year, even as we expanded selection, improved in-stock levels across product categories and geographies, and introduced new product categories.

Accounts payable increased 34% to $2.24 billion and accounts payable days increased to 63 from 62 in the prior year.

Our investment in net fixed assets increased $240 million from a year ago to $731 million. Our Q3 2008 capital expenditures were $102 million. During the quarter, approximately $132 million in principal amount of our 4.75 convertible subordinated notes converted into 1.7 million shares of common stock and we redeemed for cash the remaining total of $266 million in principal amount of the notes.

I will conclude my portion of today’s call with guidance. Incorporated into our guidance are the order trends that we have seen to date and what we believe today to be appropriately conservative assumptions. We experienced slower rates of growth towards the end of the third quarter, coinciding with disruptions in the global financial markets. While guidance takes into account these growth rates, our results are inherently unpredictable and may be materially affected by factors, including the high level of uncertainty surrounding exchange rate fluctuations, as well as the global economy and consumer spending. It is not possible to accurately predict demand and therefore our actual results could differ materially from our guidance.

As we describe in our more detail in our public filings, issues such as marking our Euro denominated debt to market quarterly, intra-company balances and foreign currencies that settle amongst our subsidiaries, unfavorable resolution of legal matters and changes to our effective tax rates can all have a material affect on guidance.

Our guidance assumes that we don’t conclude any additional business acquisitions or investments, record any further revisions to stock-based compensation estimates, and that FX rates remain approximately where they have been recently.

For Q4, we expect net sales of between $6 billion and $7 billion, a growth of between 6% and 23%. This guidance anticipates greater than 500 basis points of negative impact from foreign exchange.

GAAP operating income to be between $145 million and $305 million, or between 46% decline and 13% growth. This includes approximately $85 million for stock-based compensation and amortization of intangible assets.

We anticipate consolidated segment operating income, which excludes stock-based compensation and other operating expense to be between $230 million and $390 million, or between 30% decline and 19% growth.

For the calendar year 2008, we expect net sales of between $18.46 billion and $19.46 billion, a growth of between 24% and 31%. This guidance anticipates approximately 100 basis points of positive impact from foreign exchange.

GAAP operating income to be between $716 million and $876 million, or between 9% growth and 34% growth. These amounts include the impact of the $53 million non-cash gain recognized in the second quarter of 2008 on the sale of the company’s European DVD rental assets. This includes approximately $300 million for stock-based compensation and amortization of intangible assets.

We anticipate 2008 consolidated segment operating income, which excludes stock-based compensation and other operating expense, to be between $964 million and $1.124 billion, or between 13% growth and 32% growth.

We anticipate our free cash flow growth rate to trend similar to our operating profit growth rate over time, with some variability, including from changes in working capital and excess tax benefits from stock-based compensation.

We remain heads down focused on driving a better customer experience through price, selection, and convenience. We believe putting customers first is the only reliable way to create lasting value for shareholders.

Thanks and with that, Rob, let’s move to questions.

Rob Eldridge

Great, thanks, Tom. Let’s move on to the Q&A portion of the call with Jeff and Tom. Operator, will you please remind our listeners how to initiate a question?

Question-and-Answer Session

Operator

(Operator Instructions) We’ll go first to James Mitchell with Goldman Sachs.

James Mitchell - Goldman Sachs

Thank you very much for taking my question. It looked like your third quarter margin was better than your guidance, despite the new fulfillment centers, whereas for the fourth quarter, you are guiding for margins to be flat to down year-on-year. Is that a delta going into the fourth quarter primarily because you anticipate cutting prices to sustain sales growth, or is there anything else that is going into the margin evolution?

Thomas J. Szkutak

Well, the guidance that we’ve given, we gave a relatively wide range of guidance that we believe to be appropriately conservative and prudent certainly in this environment, and so it depends on really where you look at the range. You know, you see also a fairly sizable range on the operating margins as well on the bottom but it reflects again both the wide range and also the fact that our -- implicit in the assumptions that we gave for Q4, certainly a sizable change from currency as well, which is impact both the top and the bottom.

Operator

We’ll go next to Doug Anmuth with Barclays Capital.

Doug Anmuth - Barclays Capital

Can you tell us what you are seeing in terms of early discounting from your competitors as we go towards the holidays? And what level of discounting does the midpoint of your CSOI guidance imply relative to last holiday season? Thank you.

Thomas J. Szkutak

You know, we operate in a very competitive environment. That’s not something that’s new. We have competitors offline, you know, as you go to your home or office, you drive by or walk by those every day. We have certainly a number of online competitors as well, so we have -- we are very used to operating in a very competitive environment and we’ve been very successful at making sure that we have great prices for customers in this environment and that’s not something that is new. That is something that we have been dealing with for many years, and so it is certainly hard to predict what will happen over the course of any given quarter but what we think will happen is reflected in the guidance that we have given today.

Operator

We’ll go next to Scott Devitt with Stifel Nicolaus.

Scott Devitt - Stifel Nicolaus

Thank you. Two questions, if I could -- first in terms of the gross and operating margin by region, the domestic margin continues to go down and international go up and your third party units have been sustained at about 31% of total. So I’m just wondering if the margin impact is driven by the mix shift, where the U.S. business first party’s growing faster than third and third party faster than first international.

And then secondly, could you give either a number or the impact that you had implied in fourth quarter guidance for currency when you gave guidance on the third quarter call for the implied fourth quarter guidance?

Thomas J. Szkutak

Your questions on margins to start with, those were operating margins or --

Scott Devitt - Stifel Nicolaus

Well, both but I guess maybe just looking at gross margin, because --

Thomas J. Szkutak

You were cutting out, so operating?

Scott Devitt - Stifel Nicolaus

It would be gross margin.

Thomas J. Szkutak

Okay. You know, certainly you are seeing -- just think about it from an opportunity standpoint. We have more room to certainly -- or more opportunity certainly in our international segment as you look at our gross margins. That’s something that we’ve been talking about for quite some time. You know, there’s a number of factors there. Certainly we had a lot more newer categories over the past few years then in North America, although we are adding categories in both segments and selection dramatically in both segments.

So you have a number of factors but certainly we are earlier in third party and international, as well as the category mix in terms of where we are from a geography standpoint and our ability to get better prices with supplies has improved, so those are factors that are certainly impacting our international segment.

In terms of the exchange guidance, we obviously didn’t give [inaudible] implied, we didn’t give guidance for Q4 last time. We gave guidance for Q3 and the total year but I think this will be helpful.

Basically if you take the top end of the range, the $20.1 billion that we gave last time for revenue, right now we are talking just under 19.5, 19.463, so that’s a little over $600 million. We said that last time that the total year would be more than 400 basis points of favorable impact from exchange. Now we are saying approximately 100 basis points. In dollar terms, that’s approximately $500 million and so -- and the bulk of that more than $400 million is in Q4, from a change from last time, if that’s helpful. The remainder is in Q3. If you’ll remember, we said approximately 450 basis points for Q3 for exchange. That came in approximately 240 roughly, so that’s the delta, if that helps.

Scott Devitt - Stifel Nicolaus

Thanks.

Operator

We’ll go next to Mark Mahaney with Citigroup.

Mark Mahaney - Citigroup

A couple of quick questions -- that was a very significant increase in headcounts this quarter, more than we’ve seen in the past. Was there something new about where those people are being deployed?

Secondly, you made a comment about seeing some disruptions at the end of the third quarter from some of the -- some of the economic dislocations. Did you see that continue into the December quarter?

And then the final question has to do at the very high end of your range, your guidance range in Q4, if you adjust for FX implies very little deceleration on a much tougher organic revenue comp. So I guess the question is are you seeing something that -- what would allow you to actually do something like 28% organic revenue growth? Are there new categories, new international launches that could allow you to get to the high-end of the range in a really troubling market with a tough comp? Thanks.

Thomas J. Szkutak

I’m sorry, could you just repeat the first part of the question, Mark?

Mark Mahaney - Citigroup

A lot of new employees, 2100 new employees added in the quarter. That’s a lot more than we’ve seen in the past. Any new place for deployment of those employees?

Thomas J. Szkutak

The vast majority of those employees, a very high percentage of those, are in operations and customer service as we get ready for Q4. In some of my opening remarks, you also heard me talk about we opened three new fulfillment centers and certainly that’s part of that increase, so again a very high percentage of that is again ops and CS related.

In terms of the guidance, you mentioned the upper end. You know, we gave a pretty wide range of guidance. We think that that’s prudent during this -- you know, when the environment is uncertain and it’s -- and we have limited visibility as all companies have in this environment, so we think that that’s appropriate. But again, certainly the upper end of guidance, if you look at our Q3, we saw very solid growth, 31% on a dollar basis, 28% excluding exchange. Keep in mind that we are overlapping Harry Potter 7 from last year. The impact that we mentioned last year was approximately 290 basis points, so if you back that out it rounds to 31% growth excluding Harry Potter and foreign exchange rates.

And you know, we think we are relatively well-positioned. We’ve been working very hard for years on making sure that we have a great experience with customers. We are trying to make Q4 even better than last year. We think we are well-positioned to do that. We have added a lot of selection and we have worked very hard at pricing. We have not only our free shipping offers around the world but certainly Prime has grown a lot since last Q4, so we are very optimistic from a customer experience standpoint and we will have to see where that ends up from a revenue perspective and that’s why we are giving the wide range that we have given today.

Mark Mahaney - Citigroup

Thank you, Tom.

Operator

(Operator Instructions) We’ll go next to Justin Post with Merrill Lynch.

Justin Post - Merrill Lynch

Thank you. In September, can you talk about the fundamentals -- you did see some softness. Was it customers, units? I imagine also ASPs on the currency but any detail on that.

And then secondly, some nice metrics on the Kindle. As books go more digital and you hopefully can capitalize on the Kindle, does that help Amazon's long-term profitability or hurt it? How do you look at that over a long-term basis?

Thomas J. Szkutak

In terms of what we have seen, you know, I talked about currency. Currency moved a lot, as part of the disruption in the financial markets towards the end of the quarter, through the quarter and towards the end of the quarter and obviously much more recently as well. And in terms of -- we certainly saw some slowness of growth in areas as you would expect with the disruptions in the financial markets.

You know, one data point certainly we saw a deceleration of growth in purchase items over $1,000, and so that’s really one item that we saw. But again, what we’ve seen is factored into the guidance that we have given and as I mentioned, because of our model and because we have worked very hard at not only having low prices and affording low prices but knowing where we are relative to others, we think that that positions us very well in this environment. It positions us well in up environments, you know, customers want great values in good environments but they want especially good prices in this environment, you know, the macro environment that we are under today.

So again, hard to tell, which is why the range that we’ve given for guidance, where we will end up but we think we are positioned very well.

Justin Post - Merrill Lynch

And then on the Kindle? How do you see that affecting your long-term profitability in the book segment?

Jeffrey P. Bezos

Well, one thing that I think you could imagine happening over the long-term there is that the prices of books will be cheaper, so most of the books that we are offering on Kindle today are $9.99, even if they are $20 or $25 in print form. And so you can see that -- I think that probably the best way to answer your question is we would hope to sell many more units and make less money per unit but all in, have a very strong business.

Justin Post - Merrill Lynch

Thanks, Jeff.

Operator

We’ll go next to Jeetil Patel with Deutsche Bank.

Jeetil Patel - Deutsche Bank

A couple of questions -- first of all, Jeff, can you characterize what you are seeing in this downturn or kind of issues in the marketplace or spending habits compares to what you saw maybe Q3, early Q4 back in 2000 when the bubble burst, just as a basis of comparison, how would you characterize it?

Second, your operating margins, consolidated segment operating margins are down sequentially in Q4 when typically you get the effects or economies of scale advantage on your side. I guess I’m just trying to figure out, understandable that your FX is going against -- the FX is going against you but it seems like you should be seeing your costs come down a bit, at least from an international standpoint. Is there something else going on in the number, your plan to kind of keep spending up as it relates to marketing or just overhead and fulfillment that’s going to be the drain from a margin standpoint as you look at Q4 relative to Q3? Thanks.

Jeffrey P. Bezos

On the first part of your question, relative to 2001, it’s a very difficult question to answer in large part because Amazon has changed so much in that intervening time period. We have so many more product categories now than we did then. The scale of the business is very different, the operating efficiency of the business is very different. We have spent a lot of time and hard work reducing defects at the root so that we can have lower operating costs and pass on lower prices to customers.

I love our position today in the marketplace because we have been spending so much time making sure we are the low-cost provide and that is a -- you know, something that is likely to be appealing to people in this kind of economy. So not only low cost but also -- low cost on part prices but matching that with free shipping. So it’s difficult to make that comparison. If you go back in time, we were able to find back then certain segments of our business which were impacted, they were very technology related, like computer books and investing in business books and so on. Our business is now so much more diversified across product categories, although as Tom mentioned we have seen deceleration in items, for example, of above $1,000.

So I guess I would leave it at that -- very difficult to make crisp comparisons relative to that time period.

Jeetil Patel - Deutsche Bank

What about customer behavior wise?

Jeffrey P. Bezos

And in terms of your operating margin question in terms of looking at it sequentially, as you see from the guidance, the implied operating margins would have at the higher end being sequentially up and on the lower end, down. And certainly when you plan for the seasonal quarter you plan for a peak. We are getting ready certainly for what we hope to be a strong quarter. We think we are well-positioned for that and having facilities and associated structure to support that, and so that is what we are trying to do, trying to make sure that we support it. So if we are at the lower end of guidance, we’ll have certainly some of the costs but not the revenue to support that. But again, we think we are well-positioned for Q4.

Operator

We’ll go next to Brian Pitz with Banc of America Securities.

Brian Pitz - Banc of America

Thanks. We’ve seen third-party data suggesting that your share increase in the large TV market has continued to do very well. We are wondering if you expect the move to digital broadcasting by February to accelerate TV and related sales in Q4 and Q1. And then separately, would you provide any additional color on the growth in advertising related revenue to your business? Thanks.

Jeffrey P. Bezos

You know, it’s really hard to say on the TV side. What I would say though is like the comment we made on across the business, we are going to make sure that we have great prices and that is something that we have been doing. And we do have great selection in that area that you are referring to in terms of the large TVs, so we are certainly a -- we should be in the customers’ consideration set, given the service that we provide and the selection and the prices. So I think that’s -- in terms of what will happen related to next year is difficult to say.

Brian Pitz - Banc of America

And then just on advertising, any comments?

Jeffrey P. Bezos

I would say historically, our primary means of driving demand has been to focus on what we consider to be the primary customer experience drivers -- low prices, free shipping, selection, speedy delivery, and we are going to continue. We think that’s likely to continue to be the best way to drive demand in our business.

Brian Pitz - Banc of America

Great, thanks.

Operator

We’ll go next to Jeffrey Lindsay of Sanford Bernstein.

Jeffrey Lindsay - Sanford C. Bernstein

Would you be able to give us some insights as to your plans for the payments business and how fast do you see that moving ahead? Do you think it is going to be a meaningful contributor to growth or margins going forward? And if so, what time scale?

And then also, could you just give us an indication -- when you make electronic sales of media, are they completely cannibalistic to your traditional media sales or are they additive? Thank you.

Jeffrey P. Bezos

So far what we have seen with the Kindle book units is that they are additive to physical book units. So when somebody buys a Kindle and the period after, you know sort of the post purchase period post buying a Kindle, they buy 1.6 times as many Kindle books as they bought physical books prior to buying a Kindle, and they continue to buy the same number of physical books. So that’s what we have seen so far and it’s a very -- obviously a very positive outcome. We hope that continues.

Operator

We’ll go next to Imran Khan from J.P. Morgan.

Imran Khan - J.P. Morgan

Thank you for taking my questions. One key question is if this recession lasts longer than many of us would like it to, a lot of companies are talking about cost containment. As you look out over the next 18 to 24 months, how are you thinking about managing your cost over the next 18 to 24 months? Do you think you will continue to invest in the business or do you think if there is a recession, you will contain some costs?

Jeffrey P. Bezos

Our thinking is that we are going to continue to invest in the business but we are going to be especially prudent in how we make those investments. We just think that’s sensible in the context of this macro environment.

And let me answer the payments question from the prior caller who I forgot to answer, but the -- basically we have a couple of services today, external payment services. One call the flexible payment service, checkout by Amazon, simple pay. Those are the three primary ones. And these things are new offerings. The flexible payment service is designed for software developers to be able to design and build their own payment services, or to deeply integrate payments into whatever application they happen to be building and it has a sophisticated and a very well thought through set of APIs that enable great flexibility.

Checkout by Amazon and Simple Pay are for merchants on third-party websites to be able to incorporate Amazon payments into their websites so that their customers can use their Amazon credentials when checking out. These are new seeds that we’ve planted and the question was what kind of time line might those businesses become meaningful, and that’s very difficult to say. We would keep working at those businesses and hope that over time, they would become meaningful.

Thomas J. Szkutak

And just to add on to Jeff’s previous answer related to the next 18 to 24 months, and you were -- from a program perspective, keep in mind that we have been operating in an environment of challenging prices, a very competitive environment for some time. We have also been operating in an environment where we have been offering free shipping, for example, while fuel prices have been going up dramatically. These are things that are not new to us and so in addition to the programs and being prudent, we are going to continue to work on defect reduction, which will help us from a cost structure standpoint, continue to work on other things to make our overall cost structure improved over time.

Imran Khan - J.P. Morgan

Can I ask one more question? I was going to ask, you know, you talked about the weakness in the overall business. Could you give us maybe more color into that -- what kind of trends are you seeing in the U.K. market?

Thomas J. Szkutak

I don’t have a lot to add to the U.K. but again on the total business, we are actually very pleased with what we saw in Q3. You know, in a -- we think in a relatively challenging environment, we think 31% growth on a dollar basis, 28% excluding exchange and 31% excluding exchange and Harry Potter is relatively strong. And we think that we are well-positioned for customers and the environment that we are in during Q4 and we are getting ready right now for that seasonal time.

Imran Khan - J.P. Morgan

Great. Thank you.

Operator

Our final question will come from James Mitchell with Goldman Sachs.

James Mitchell - Goldman Sachs

I apologize for taking two questions but I guess my question was just once again, you have dramatically broadened the revenue range you are guiding to for the fourth quarter this year versus a much narrower range, for example, in the fourth quarter last year and I fully understand that the world is a different place today, unfortunately, from what it was then. But does the broader revenue range purely reflect greater uncertainty about constant currency spending by consumers, or are you effectively building in some headwind or tail room for further FX moves, given how volatile the currencies have been the last few weeks?

Thomas J. Szkutak

It reflects a broad range of items and as I mentioned earlier, we have -- all companies have limited visibility we think right now and we are no different, and so we are putting together what we believe to be appropriately conservative guidance. It is a wider range than we have given before, both in dollar terms and percentage terms. We think that is prudent in this environment and again, we are going to focus on what we do best, which is satisfying customers and we think we are well-positioned to do that, so that’s what we plan on doing.

James Mitchell - Goldman Sachs

Could I ask a super-quick follow-on question? It looks like you’ve cast the super saver delivery charge in the U.K. from 15 pounds to 5 pounds. Do you see yourself stimulating growth globally through lower shipping costs this Christmas, and is that part of what is going into your margin consideration?

Jeffrey P. Bezos

We reduced the Super Saver delivery threshold from 15 pounds to 5 pounds, so you now in the U.K. only have to order 5 pounds or more of items to get the Super Saver delivery. And basically we did that because from a cost structure point of view, we were in a position to do it. So you should think of that as an example of us doing the kinds of things you have seen us do over the last 10 years, which is try to figure out how to lower prices and then to lower prices.

James Mitchell - Goldman Sachs

Great. Thank you very much.

Rob Eldridge

Thank you for joining us on the call today and for your questions. A replay will be available on our investor relations website at last through the end of the quarter. We appreciate your interest in Amazon.com and look forward to talking with you again next quarter.

Operator

This does conclude today’s conference. Thank you for your participation and have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Amazon.com Q3 2008 Earnings Call Transcript
This Transcript
All Transcripts