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Amazon braces for the Grinch at Christmas - or not

There may be trouble ahead

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Amazon.com had a decent third quarter but has scared investors by giving an almost absurdly broad estimate of fourth quarter revenues and profits.

Amazon made sales of $4.26bn - up 31 per cent - in the three months ended 30 September 2008, just missing Wall Street targets. Operating income was up 26 per cent to $154m, while net income increased 48 per cent to $118m. The net figure included a foreign currency related net benefit of $15m.

But in predicting performance in the fourth quarter, when Amazon would usually make the lion's share of its profits, the company said uncertainties around exchange rates and the state of the global economy and consumer spending made accurate predictions difficult.

Amazon said it expects sales of between $6bn and $7bn with operating income anywhere between $145m and $305m - either a 46 per cent drop or a 13 per cent hike in profits. But there were hopes that Amazon would benefit from cash-concerned consumers moving online to find bargains.

Few doubt that most of developed economies are headed to a recession. But Amazon's extremely broad take on how its business might be affected appears to have spooked investors, and shares in the online bookseller fell 14 per cent.

For the full year the company expects revenues of between $18.46bn and $19.46bn - between 24 per cent and 31 per cent up on 2007, but short of Wall Street estimates. Operating income should be between $716m and $876m. ®

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