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Amazon.com Announces First Quarter Financial Results; For the First Time Sales of Electronics & Other General Merchandise Surpass $1.8 Billion and Comprise 25% of Total Sales over the Past Year

SEATTLE--(BUSINESS WIRE)--April 26, 2005--Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its first quarter ended March 31, 2005.

Operating cash flow grew 33% to $523 million for the trailing twelve months, compared with $393 million for the trailing twelve months ended March 31, 2004. Free cash flow grew 21% to $417 million for the trailing twelve months, compared with $344 million for the trailing twelve months ended March 31, 2004.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at March 31, 2005, compared with 432 million a year ago.

Net sales increased 24% to $1.90 billion in the first quarter, compared with $1.53 billion in first quarter 2004. Excluding the $30 million benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 22% compared with first quarter 2004.

Operating income declined 2% to $108 million in the first quarter, compared with $110 million in first quarter 2004. As previously announced, the Company chose to adopt SFAS 123(R), the new accounting rules on stock-based compensation, earlier than required, effective January 1, 2005. Excluding the $14 million impact due to this adoption, operating income would have grown 10% to $122 million. Operating income benefited by $3 million from year-over-year changes in foreign exchange rates throughout the quarter.

Net income was $78 million in the first quarter, or $0.18 per diluted share, compared with net income of $111 million, or $0.26 per diluted share, in first quarter 2004. Net income for the first quarter includes $56 million in income tax expense, compared with a $2 million income tax benefit in first quarter 2004. First quarter also includes a $26 million gain for the cumulative effect of a change in accounting principle related to the Company's early adoption of SFAS 123(R).

"We're seeing especially heavy use of Amazon Prime in Electronics, Tools, Kitchen, and Health & Personal Care," said Jeff Bezos, founder and CEO of Amazon.com. "For $79 a year, Amazon Prime members get 'all-you-can-eat' free express shipping. Getting your items right away changes the way you use and think about Amazon.com."

Amazon Prime, Amazon.com's first-ever membership program, was introduced February 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon.com. Members can order as late as 6:30 p.m. ET and still get their order the next day for only $3.99 per item, and can share the benefits of Amazon Prime with up to four family members living in their household.

    Highlights

    --  North America segment sales, representing the Company's U.S.
        and Canadian sites, were $1.03 billion, up 21% from first
        quarter 2004. Segment operating income decreased 13% to $66
        million in first quarter 2005 from $76 million in first
        quarter 2004.

    --  North America Media growth was 17% in the first quarter,
        compared with 16% in first quarter 2004.

    --  International segment sales, representing the Company's U.K.,
        German, French, Japanese and Chinese sites, were $875 million,
        up 28% compared with first quarter 2004. Excluding the benefit
        from year-over-year changes in foreign exchange rates
        throughout the quarter, net sales growth was 24%. Segment
        operating income increased 51% to $62 million from $41 million
        in first quarter 2004.

    --  On a trailing twelve month basis, International segment sales
        accounted for 45% of worldwide net sales, up from 40% for the
        trailing twelve months ended March 31, 2004.

    --  Worldwide Electronics & other general merchandise sales grew
        45% to $481 million, and represented 25% of net sales,
        compared with 22% for first quarter 2004.

    --  The Company has received 700,000 pre-orders for Harry Potter
        and the Half Blood Prince, the sixth book in J.K. Rowling's
        epic Harry Potter series. Amazon.com is offering its U.S.
        customers guaranteed delivery of the book on the release date,
        Saturday, July 16, 2005, for the same price as standard
        shipping, with free delivery for Amazon Prime members.

    --  Amazon Services Europe and leading U.K. retailer Marks &
        Spencer announced an agreement for Amazon to host and provide
        the technology behind the Marks & Spencer branded website and
        its in-store and telephone ordering and customer services
        systems.

    --  A9.com, a subsidiary of Amazon.com, launched A9.com
        OpenSearch, a collection of technologies built on top of
        popular open standards to allow content providers to publish
        their search results in a format suitable for syndication.
        OpenSearch enables content providers' results to be displayed
        anywhere, anytime. Any site that has content -- and a search
        box--can choose to return results on A9.com using OpenSearch
        RSS. Customers can now view search results from The New York
        Times, Flickr, Wikipedia and over 150 other content providers
        at www.a9.com.

    Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of April 26, 2005. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.

    Second Quarter 2005 Guidance

    --  Net sales are expected to be between $1.675 billion and $1.825
        billion, or grow between 21% and 32%, compared with second
        quarter 2004.

    --  Operating income is expected to be between $50 million and $80
        million, or decline between (42%) and (7%), compared with
        second quarter 2004. This guidance includes stock-based
        compensation of $35 million, including the impact from the
        Company's January 1, 2005 early adoption of SFAS 123(R), and
        assumes, among other things, that no additional intangible
        assets are recorded and that there are no further revisions to
        restructuring-related estimates.

    Full Year 2005 Expectations

    --  Net sales are expected to be between $8.175 billion and $8.675
        billion, or grow between 18% and 25%, compared with 2004.

    --  Operating income is expected to be between $395 million and
        $510 million, or between (10%) and 16% growth, compared with
        2004. This expectation includes stock-based compensation of
        $115 million, including the impact from the Company's January
        1, 2005 early adoption of SFAS 123(R), and assumes, among
        other things, that no additional intangible assets are
        recorded and that there are no further revisions to
        restructuring-related estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant indebtedness, system interruptions, consumer trends, limited operating history, government regulation and taxation, fraud, and new business areas. More information about factors that potentially could affect Amazon.com's financial results is included in Amazon.com's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2004, and all subsequent filings.

Financial Measure

The following measure is defined by the Securities and Exchange Commission as a non-GAAP financial measure.

Free Cash Flow

Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets, including internal-use software and website development. A tabular reconciliation of differences from the comparable GAAP measure -- operating cash flow -- is included in the attached "Supplemental Financial Information and Business Metrics."

About Amazon.com

Amazon.com (NASDAQ: AMZN), a Fortune 500 company based in Seattle, opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer customers the lowest possible prices. Amazon.com and third-party sellers offer millions of unique new, refurbished, and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, toys and baby, and home and garden.

Amazon.com and its affiliates operate seven retail websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com.

As used herein, "Amazon.com," "we," "our" and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates otherwise.

                           AMAZON.COM, INC.
                 Consolidated Statements of Cash Flows
                             (in millions)
                              (unaudited)



                                       Three Months     Twelve Months
                                           Ended            Ended
                                          March 31,        March 31,
                                      --------------- ---------------
                                        2005    2004     2005    2004
                                       ------- ------  -------- ------

CASH AND CASH EQUIVALENTS, BEGINNING
 OF PERIOD                            $1,303  $1,102  $   769  $  496

OPERATING ACTIVITIES:
Net income                                78     111      555     157
Adjustments to reconcile net income to
 net cash provided by (used in)
 operating activities:
  Depreciation of fixed assets,
   including internal-use software
   and website development, and other
   amortization                           28      18       86      73
  Stock-based compensation                19       7       70      68
  Other operating expense (income)         1       -       (7)      1
  Losses (gains) on sales of marketable
   securities, net                         -      (1)       1      (7)
  Remeasurements and other               (14)    (20)       8      88
  Non-cash interest expense and other      1       1        5       6
  Deferred income taxes                   50      (7)    (200)     (6)
  Cumulative effect of change in
   accounting principle                  (26)      -      (26)      -
Changes in operating assets and
 liabilities:
  Inventories                             72      13     (110)    (94)
  Accounts receivable, net and other
   current assets                         10      14       (6)    (12)
  Accounts payable                      (425)   (256)     117     138
  Accrued expenses and other current
   liabilities                           (31)    (71)      24     (11)
  Additions to unearned revenue           29      23      115     102
  Amortization of previously unearned
   revenue                               (25)    (24)    (107)   (108)
  Interest payable                       (61)    (58)      (2)     (2)
                                       ------  ------  -------  ------
    Net cash provided by (used in)
     operating activities               (294)   (250)     523     393

INVESTING ACTIVITIES:
Purchases of fixed assets, including
 internal-use software and website
 development                             (26)     (9)    (106)    (49)
Sales and maturities of marketable
 securities and other investments        348     570    1,205   1,174
Purchases of marketable securities      (504)   (505)  (1,583)   (807)
Proceeds from sale of subsidiary           -       -        -       5
Acquisitions, net of cash acquired       (15)      -      (86)      -
                                       ------  ------  -------  ------
    Net cash provided by (used in)
     investing activities               (197)     56     (570)    323

FINANCING ACTIVITIES:
Proceeds from exercises of stock
 options and other                         9      15       55     140
Repayments of long-term debt and
 capital lease obligations              (265)   (156)    (267)   (648)
                                       ------  ------  -------  ------
    Net cash used in financing
     activities                         (256)   (141)    (212)   (508)

Foreign-currency effect on cash and
 cash equivalents                        (23)      2       23      65
                                       ------  ------  -------  ------
Net increase (decrease) in cash and
 cash equivalents                       (770)   (333)    (236)    273
                                       ------  ------  -------  ------

CASH AND CASH EQUIVALENTS, END OF
 PERIOD                               $  533  $  769  $   533  $  769
                                       ======  ======  =======  ======

SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital
 leases and other financing
 arrangements                         $    -  $    1  $     1  $    3
Cash paid for interest                    84      86      106     122
Cash paid for income taxes                 3       -        7       2


Note: The attached "Financial and Operational Summary" is an
integral part of the press release financial statements.



                           AMAZON.COM, INC.
                Consolidated Statements of Operations
                 (in millions, except per share data)
                             (unaudited)

                                                        Three Months
                                                            Ended
                                                          March 31,
                                                       ---------------
                                                         2005    2004
                                                        ------- ------

Net sales                                              $1,902  $1,530
Cost of sales                                           1,444   1,169
                                                        ------  ------
Gross profit                                              458     361

Operating expenses (1):
 Fulfillment                                              166     129
 Marketing                                                 45      34
 Technology and content                                    92      58
 General and administrative                                46      30
 Other operating expense                                    1       -
                                                        ------  ------
       Total operating expenses                           350     251
                                                        ------  ------

Income from operations                                    108     110

Interest income                                             9       6
Interest expense                                          (26)    (28)
Other income, net                                           3       1
Remeasurements and other                                   14      20
                                                        ------  ------
       Total non-operating income (expense)                 -      (1)
                                                        ------  ------

Income before income taxes                                108     109

Provision (benefit) for income taxes                       56      (2)
                                                        ------  ------

Income before cumulative effect of change in accounting
 principle                                                 52     111

Cumulative effect of change in accounting principle        26       -
                                                        ------  ------

Net income                                             $   78  $  111
                                                        ======  ======

Basic earnings per share:
 Prior to cumulative effect of change in accounting
  principle                                            $ 0.13  $ 0.28
 Cumulative effect of change in accounting principle     0.06       -
                                                        ------  ------
                                                       $ 0.19  $ 0.28
                                                        ======  ======

Diluted earnings per share:
 Prior to cumulative effect of change in accounting
  principle                                            $ 0.12  $ 0.26
 Cumulative effect of change in accounting principle     0.06       -
                                                        ------  ------
                                                       $ 0.18  $ 0.26
                                                        ======  ======

Weighted average shares used in computation of earnings
 per share:
 Basic                                                    410     404
                                                        ======  ======

 Diluted                                                  423     425
                                                        ======  ======

(1) Includes stock-based compensation as follows:
 Fulfillment                                           $    4  $    1
 Marketing                                                  1       1
 Technology and content                                    10       3
 General and administrative                                 4       2
                                                        ------  ------
                                                       $   19  $    7
                                                        ======  ======

Note:  The attached "Financial and Operational Summary" is an integral
 part of the press release financial statements.




                           AMAZON.COM, INC.
                         Segment Information
                            (in millions)
                             (unaudited)
                                                        Three Months
                                                            Ended
                                                          March 31,
                                                       --------------
                                                         2005    2004
                                                        ------  ------
North America
 Net sales                                             $1,027  $  847
 Cost of sales                                            748     621
                                                        ------  ------
 Gross profit                                             279     226
 Direct segment operating expenses (1)                    213     150
                                                        ------  ------
 Segment operating income                                  66      76

International
 Net sales                                                875     683
 Cost of sales                                            696     548
                                                        ------  ------
 Gross profit                                             179     135
 Direct segment operating expenses (1)                    117      94
                                                        ------  ------
 Segment operating income                                  62      41

Consolidated
 Net sales                                              1,902   1,530
 Cost of sales                                          1,444   1,169
                                                        ------  ------
 Gross profit                                             458     361
 Direct segment operating expenses                        330     244
                                                        ------  ------
 Segment operating income                                 128     117
 Stock-based compensation                                 (19)     (7)
 Other operating expense                                   (1)      -
                                                        ------  ------
 Income from operations                                   108     110
 Total non-operating income (expense), net                  -      (1)
 Provision for income taxes                               (56)      2
 Cumulative effect of change in accounting principle       26       -
                                                        ------  ------

 Net income                                            $   78  $  111
                                                        ======  ======

Segment Highlights:
 Y/Y net sales growth:
  North America                                            21%     20%
  International                                            28      80
  Consolidated                                             24      41
 Y/Y gross profit growth:
  North America                                            23%     21%
  International                                            33      61
  Consolidated                                             27      33
 Y/Y segment operating income growth:
  North America                                          (13%)     46%
  International                                            51     163
  Consolidated                                             10      73
 Net sales mix:
  North America                                            54%     55%
  International                                            46      45

 (1) A significant majority of our costs for "Technology and content"
     are incurred in the United States and most of these costs are
     allocated to our North America segment.

Note:  The attached "Financial and Operational Summary" is an integral
 part of the press release financial statements.




                           AMAZON.COM, INC.
                  Supplemental Net Sales Information
                             (in millions)
                              (unaudited)


                                                  Three Months Ended
                                                       March 31,
                                                 ---------------------
                                                    2005       2004
                                                  ---------  ---------
North America
 Media                                           $     699  $     599
 Electronics and other general merchandise             282        224
 Other                                                  46         24
                                                  ---------  ---------
                                                     1,027        847

International
 Media                                                 675        576
 Electronics and other general merchandise             199        107
 Other                                                   1          -
                                                  ---------  ---------
                                                       875        683

Consolidated
 Media                                               1,374      1,175
 Electronics and other general merchandise             481        331
 Other                                                  47         24
                                                  ---------  ---------
                                                 $   1,902  $   1,530
                                                  =========  =========

Y/Y Net Sales Growth:
North America:
 Media                                                  17%        16%
 Electronics and other general merchandise              25         33
 Other                                                  96         23

International:
 Media                                                  17%        62%
 Electronics and other general merchandise              86        368
 Other                                                  74         65

Consolidated:
 Media                                                  17%        35%
 Electronics and other general merchandise              45         74
 Other                                                  95         23

Consolidated Net Sales Mix:
 Media                                                  72%        77%
 Electronics and other general merchandise              25         22
 Other                                                   3          1

Note: The attached "Financial and Operational Summary" is an
integral part of the press release financial statements.




                           AMAZON.COM, INC.
                      Consolidated Balance Sheets
                 (in millions, except per share data)


                                    March 31, December 31,  March 31,
                                      2005        2004        2004
                                    ---------   --------   -----------
ASSETS                             (unaudited)             (unaudited)
Current assets:
 Cash and cash equivalents         $     533   $  1,303   $       769
 Marketable securities                   618        476           229
                                    ---------   --------   -----------
  Cash, cash equivalents, and
   marketable securities               1,151      1,779           998
 Inventories                             403        480           282
 Deferred tax assets, current
  portion                                 68         81             1
 Accounts receivable, net and
  other current assets                   171        199           125
                                    ---------   --------   -----------
     Total current assets              1,793      2,539         1,406

Fixed assets, net                        245        246           218
Deferred tax assets, long-term
 portion                                 239        282             7
Goodwill                                 149        139            69
Other assets                              46         42            39
                                    ---------   --------   -----------
     Total assets                  $   2,472   $  3,248   $     1,739
                                    =========   ========   ===========

LIABILITIES AND STOCKHOLDERS'
 DEFICIT
Current liabilities:
 Accounts payable                  $     704   $  1,142   $       568
 Accrued expenses and other
  current liabilities                    309        361           245
 Unearned revenue                         45         41            37
 Interest payable                         13         74            14
 Current portion of long-term debt
  and other                                2          2             2
                                    ---------   --------   -----------
     Total current liabilities         1,073      1,620           866

Long-term debt and other               1,561      1,855         1,778

Commitments and contingencies

Stockholders' deficit:
 Preferred stock, $0.01 par value:
     Authorized shares -- 500
     Issued and outstanding shares
      -- none                              -          -             -
 Common stock, $0.01 par value:
     Authorized shares -- 5,000
     Issued and outstanding shares
       -- 411, 410 and 405 shares          4          4             4
 Additional paid-in capital            2,118      2,123         1,921
 Accumulated other comprehensive
  income                                  24         32            33
 Accumulated deficit                  (2,308)    (2,386)       (2,863)
                                    ---------   --------   -----------
     Total stockholders' deficit        (162)      (227)         (905)
                                    ---------   --------   -----------
     Total liabilities and
      stockholders' deficit        $   2,472   $  3,248   $     1,739
                                    =========   ========   ===========

Note:  The attached "Financial and Operational Summary" is an integral
 part of the press release financial statements.




                           AMAZON.COM, INC.
       Supplemental Financial Information and Business Metrics
                 (in millions, except per share data)
                             (unaudited)

----------------------------------------------------------------------
                                                            Y/Y %
                Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005     Change
                ------------------------------------------------------
Cash Flows and
 Shares

Operating cash
 flow --
 trailing twelve
 months (TTM)      $393    $410    $490    $567    $523           33%

Purchase of
 fixed assets
 (incl.
 internal-use
 software &
 website
 development) --
 TTM                $49     $56     $70     $89    $106          116%

Free cash flow
 (operating cash
 flow less
 purchases of
 fixed assets)
 -- TTM            $344    $354    $420    $477    $417           21%

Common shares
 and stock-based
 awards
 outstanding        432     434     434     434     434  less than 1%
Common shares
 outstanding        405     407     407     410     411            1%
Stock-based
 awards
 outstanding         27      27      27      25      24          (14%)
Stock-based
 awards
 outstanding --
 % of common
 shares
 outstanding        6.8%    6.7%    6.6%    6.0%    5.7%         N/A

Results of
 Operations

Worldwide (WW)
 net sales       $1,530  $1,387  $1,462  $2,541  $1,902           24%
WW net sales --
 Y/Y growth,
 excluding the
 effect of
 foreign
 exchange rates    33.2%   21.9%   23.9%   26.2%   22.3%         N/A
WW net sales --
 TTM             $5,710  $5,998  $6,326  $6,921  $7,292           28%

Gross profit       $361    $341    $356    $544    $458           27%
Gross margin --
 % of WW net
 sales             23.6%   24.6%   24.3%   21.4%   24.1%         N/A
Gross profit --
 TTM             $1,347  $1,415  $1,484  $1,602  $1,700           26%
Gross margin --
 TTM % of WW net
 sales             23.6%   23.6%   23.5%   23.1%   23.3%         N/A

Fulfillment
 costs,
 excluding
 stock-based
 compensation --
 % of WW net
 sales              8.3%    8.8%    9.3%    8.0%    8.6%         N/A
Fulfillment
 costs,
 excluding
 stock-based
 compensation --
 TTM % of WW net
 sales              8.8%    8.6%    8.6%    8.5%    8.6%         N/A

Operating income   $110     $86     $81    $162    $108           (2%)
Operating margin
 -- % of WW net
 sales              7.2%    6.2%    5.6%    6.4%    5.7%         N/A
Operating income
 -- TTM            $342    $386    $416    $440    $438           28%
Operating margin
 -- TTM % of WW
 net sales          6.0%    6.4%    6.6%    6.4%    6.0%         N/A

Net income (a)     $111     $76     $54    $347     $78          (30%)
Net income per
 diluted share
 (a)              $0.26   $0.18   $0.13   $0.82   $0.18          (29%)
Net income --
 TTM (a)           $157    $276    $315    $588    $555          255%
Net income per
 diluted share
 -- TTM (a)       $0.37   $0.65   $0.74   $1.39   $1.31          253%

Segments

North America
 segment:
  Net sales        $847    $792    $816  $1,392  $1,027           21%
  Net sales --
   Y/Y growth,
   excluding the
   effect of
   foreign
   exchange
   rates           19.9%   12.7%   15.0%   21.8%   21.1%         N/A
  Net sales --
   TTM           $3,401  $3,490  $3,597  $3,847  $4,027           18%
  Gross profit     $226    $220    $223    $355    $279           23%
  Gross margin
   -- % of North
   America net
   sales           26.7%   27.7%   27.4%   25.5%   27.2%         N/A
  Gross profit
   -- TTM          $906    $935    $958  $1,024  $1,077           19%
  Gross margin
   -- TTM % of
   North America
   net sales       26.6%   26.8%   26.6%   26.6%   26.7%         N/A
  Operating
   income           $76     $66     $57    $122     $66          (13%)
  Operating
   margin -- %
   of North
   America net
   sales            8.9%    8.3%    7.0%    8.8%    6.4%         N/A
  Operating
   income -- TTM   $307    $318    $313    $321    $311            1%
  Operating
   margin -- TTM
   % of North
   America net
   sales            9.0%    9.1%    8.7%    8.3%    7.7%         N/A

International
 segment:
  Net sales        $683    $595    $646  $1,149    $875           28%
  Net sales --
   Y/Y growth,
   excluding the
   effect of
   foreign
   exchange
   rates           57.9%   38.1%   38.9%   32.5%   23.8%         N/A
  Net sales --
   TTM           $2,310  $2,508  $2,729  $3,074  $3,265           41%
  Net sales --
   TTM % of WW
   net sales       40.5%   41.8%   43.1%   44.4%   44.8%         N/A
  Gross profit     $135    $121    $132    $190    $179           33%
  Gross margin
   -- % of
   International
   net sales       19.8%   20.4%   20.5%   16.5%   20.5%         N/A
  Gross profit
   -- TTM          $442    $479    $527    $578    $623           41%
  Gross margin
   -- TTM % of
   International
   net sales       19.1%   19.1%   19.3%   18.8%   19.1%         N/A
  Operating
   income           $41     $35     $38     $55     $62           51%
  Operating
   margin -- %
   of
   International
   net sales        6.1%    5.9%    5.8%    4.8%    7.2%         N/A
  Operating
   income -- TTM   $104    $126    $153    $169    $190           83%
  Operating
   margin -- TTM
   % of
   International
   net sales        4.5%    5.0%    5.6%    5.5%    5.8%         N/A
----------------------------------------------------------------------
Note:  The attached "Financial and Operational Summary" is an integral
 part of this Supplemental Financial Information and Business Metrics.

(a) Q4 2004 net income includes a $244 million benefit from realizing
 a deferred tax asset related primarily to net operating loss
 carryforwards attributable to continuing operations; Q1 2005 net
 income includes a $56 million tax expense primarily due to taxable
 income resulting from the transfer of certain assets from U.S. to
 international locations.




                        AMAZON.COM, INC.
       Supplemental Financial Information and Business Metrics
 (in millions, except inventory turnover, accounts payable days, and
                            employee data)
                             (unaudited)

----------------------------------------------------------------------
                                                                Y/Y %
                     Q1 2004  Q2 2004 Q3 2004 Q4 2004  Q1 2005 Change
                     -------------------------------------------------
Segments (continued)

Consolidated
 segments:
  Operating expenses    $244     $240    $261    $367     $330     35%
  Operating expenses
   -- TTM               $937     $970  $1,019  $1,112   $1,198     28%
  Operating income      $117     $101     $95    $177     $128     10%
  Operating margin --
   % of consolidated
   sales                 7.6%     7.3%    6.5%    7.0%     6.8%   N/A
  Operating income --
   TTM                  $411     $444    $466    $490     $502     22%
  Operating margin --
   TTM % of
   consolidated net
   sales                 7.2%     7.4%    7.4%    7.1%     6.9%   N/A

Supplemental North
 America Segment Net
 Sales:
  Media                 $599     $542    $564    $885     $699     17%
  Media -- TTM        $2,351   $2,394  $2,455  $2,589   $2,690     14%
  Electronics and
   other general
   merchandise          $224     $226    $229    $449     $282     25%
  Electronics and
   other general
   merchandise -- TTM   $935     $983  $1,031  $1,128   $1,185     27%
  Electronics and
   other general
   merchandise -- TTM
   % of North America
   net sales              27%      28%     29%     29%      29%   N/A
  Other                  $24      $25     $24     $58      $46     96%
  Other -- TTM          $115     $113    $111    $130     $153     33%

Supplemental
 International
 Segment Net Sales:
  Media                 $576     $496    $530    $911     $675     17%
  Media -- TTM        $2,000   $2,129  $2,285  $2,513   $2,612     31%
  Electronics and
   other general
   merchandise          $107      $99    $116    $237     $199     86%
  Electronics and
   other general
   merchandise -- TTM   $309     $377    $442    $558     $651    111%
  Electronics and
   other general
   merchandise -- TTM
   % of International
   net sales              13%      15%     16%     18%      20%   N/A
  Other                   $0       $1      $0      $1       $1     74%
  Other -- TTM            $1       $2      $2      $2       $3     96%

Supplemental
 Worldwide Net Sales:
  Media               $1,175   $1,037  $1,094  $1,796   $1,374     17%
  Media -- TTM        $4,351   $4,523  $4,740  $5,102   $5,302     22%
  Electronics and
   other general
   merchandise          $331     $325    $344    $686     $481     45%
  Electronics and
   other general
   merchandise -- TTM $1,244   $1,360  $1,474  $1,686   $1,835     48%
  Electronics and
   other general
   merchandise -- TTM
   % of WW net sales      22%      23%     23%     24%      25%   N/A
  Other                  $24      $25     $24     $59      $47     95%
  Other -- TTM          $116     $115    $113    $133     $156     34%

Balance Sheet

Cash and marketable
 securities             $998   $1,151  $1,185  $1,779   $1,151     15%

Inventory, net --
 ending                 $282     $284    $357    $480     $403     43%
Inventory -- average
 inventory % of TTM
 net sales               4.1%     4.3%    4.6%    4.9%     5.0%   N/A
Inventory turnover,
 average -- TTM         18.7     17.9    16.6    15.7     15.5   (17%)

Fixed assets, net       $218     $216    $227    $246     $245     13%

Accounts payable days
 -- ending                44       51      57      53       44    (1%)

Other

Employees (full-time
 and part-time;
 excludes contractors
 & temporary
 personnel)            8,100    8,200   8,800   9,000    9,400     16%

----------------------------------------------------------------------

Note:  The attached "Financial and Operational Summary" is an integral
 part of this Supplemental Financial Information and Business Metrics.


                           Amazon.com, Inc.
                   Financial and Operational Summary
                              (unaudited)

    Quarterly Results of Operations (comparisons are with the
equivalent period of the prior year, unless otherwise stated)

    Net Sales

    --  Shipping revenue, which excludes amounts earned from
        third-party sellers where we don't provide fulfillment
        services, was $108 million, up 15% from $94 million.

    --  Amounts paid in advance for subscription services, including
        amounts received from online DVD rentals, Amazon Prime, and
        other membership programs, are deferred and recognized as
        revenue over the subscription terms.

    --  Amounts earned from third-party sales on our websites are
        recorded as net amounts.

    Cost of Sales

    --  Cost of sales consists of the purchase price of products sold
        by us, inbound and outbound shipping charges, packaging
        supplies, and costs incurred in operating and staffing our
        fulfillment and customer service centers on behalf of other
        businesses, such as Toysrus.com and Target.com.

    --  Outbound shipping-related costs totaled $163 million, up 19%
        from $137 million. Net shipping loss was $55 million, up 29%
        from a net loss of $43 million, resulting primarily from our
        free shipping offers and Amazon Prime.

    Operating Expenses

    --  Depreciation and amortization of fixed assets was $22 million,
        up from $17 million and is classified within the corresponding
        operating expense categories.

    --  As previously announced, we chose to early adopt SFAS 123(R),
        the new accounting rules on stock-based compensation,
        effective January 1, 2005. Stock-based compensation increased
        $12 million to $19 million, including the $14 million impact
        from our early adoption of SFAS 123(R). Stock-based
        compensation would have been $5 million under our prior
        accounting method, down $2 million versus first quarter 2004.

    --  In accordance with SAB 107, issued March 2005, we present
        stock-based compensation within the same operating expense
        line items as cash compensation.

    --  Operating expenses with and without stock-based compensation
        are as follows:

                           Q1 2005                   Q1 2004
                  ------------------------- -------------------------
                     As     Stock-             As     Stock-
                  Reported   Based    Net   Reported   Based    Net
                            Compen-                   Compen-
                            sation                    sation
                  --------  ------- ------- --------  ------- -------
Operating
 Expenses (in
 millions):
  Fulfillment     $ 166.6   $ (3.6) $163.0  $ 128.7   $ (1.0) $127.7
  Marketing          44.6     (1.5)   43.1     34.2     (0.6)   33.6
  Technology and
   content           91.8     (9.8)   82.0     58.4     (3.3)   55.1
  General and
   administrative    46.4     (4.6)   41.8     29.6     (2.2)   27.4
  Other operating
   expense
   (income)           1.3        -     1.3     (0.5)       -    (0.5)
                   -------   ------  ------  -------   ------  ------
  Total operating
   expenses       $ 350.7   $(19.5) $331.2  $ 250.4   $ (7.1) $243.3
                   =======   ======  ======  =======   ======  ======

Year-over-year
 Percentage
 Growth:
  Fulfillment        29.4 %           27.6 %   16.3 %           23.1 %
  Marketing          30.3             28.1     17.2             19.2
  Technology and
   content           57.3             49.0     (9.2)            10.0
  General and
   administrative    56.8             52.7     12.8             29.9

Percent of Net
 Sales:
  Fulfillment         8.8 %            8.6 %    8.4 %            8.3 %
  Marketing           2.3              2.3      2.2              2.2
  Technology and
   content            4.8              4.3      3.8              3.6
  General and
   administrative     2.4              2.2      1.9              1.8
    Fulfillment

    --  Fulfillment costs include those costs incurred in operating
        and staffing our fulfillment and customer service centers,
        including costs attributable to buying, receiving, inspecting
        and warehousing inventories; credit card fees; and bad debt
        costs, including costs associated with our guarantee of
        certain third-party seller transactions. Fulfillment costs
        also include amounts paid to third parties, who assist us in
        fulfillment and customer service operations.

    --  Credit card fees associated with third-party seller
        transactions are assessed on the gross purchase price of
        underlying transactions, and therefore represent a larger
        percentage of our recorded net revenue than credit card fees
        for our retail sales. Bad debt costs, including costs
        associated with our guarantee program, are also higher as a
        percentage of recorded net revenue versus our retail sales.
        Accordingly, these items negatively affect fulfillment costs
        as a percentage of net sales.

    --  Fulfillment costs increased in absolute dollars and as a
        percentage of sales from the prior year due to variable costs
        corresponding with sales volume, our mix of product sales,
        credit card fees, and bad debt costs, including costs
        associated with our guarantee of certain third-party seller
        transactions. We expanded our fulfillment capacity in 2004 and
        plan to further expand our worldwide fulfillment capacity in
        2005. We also recorded a charge of $5 million relating to
        certain North America fulfillment equipment removed from
        service in the first quarter which is classified as
        depreciation and amortization on our cash flow statement. We
        expect absolute amounts spent in fulfillment to increase over
        time.

    Marketing

    --  Marketing efforts include targeted online marketing channels,
        such as our Associates and Syndicated Stores programs,
        sponsored search, portal advertising, e-mail campaigns and
        other initiatives. Our marketing expenses are largely
        variable, based on growth in sales and changes in rates. To
        the extent there is increased or decreased competition for
        these traffic sources, or to the extent our mix of these
        channels shifts, we would expect to see a corresponding change
        in our marketing expense. While costs associated with free
        shipping are not included in marketing expense, we view our
        free-shipping offers as an effective worldwide marketing tool
        and intend to continue offering them indefinitely. We expect
        absolute amounts spent in marketing to increase over time.

    Technology and Content

    --  Technology and content expenses consist principally of payroll
        and related expenses for employees involved in development of
        our websites, including application development, editorial
        content, merchandising selection and systems and
        telecommunications support; costs associated with the systems
        and telecommunications infrastructure; and costs of acquired
        content.

    --  Our spending in technology and content has increased as we are
        adding computer scientists and software engineers to continue
        to enhance the customer experience on our websites and those
        websites powered by us, and to improve our process efficiency.
        Additionally, we continue to invest in several areas of
        technology, including seller platforms, A9.com, web services,
        additional development centers and digital initiatives. We
        intend to continue investing in areas of technology and other
        initiatives and expect absolute dollars spent in technology
        and content to increase over time as we continue to add
        computer scientists and software engineers to our staff.

    --  A significant majority of these technology costs are incurred
        in the U.S. and most of them are allocated to our North
        America segment.

    --  We expense costs related to the development of internal-use
        software and website development other than those incurred
        during the application development stage. Costs incurred
        during the application development stage are capitalized and
        amortized over the two-year estimated useful life of the
        software. We capitalized $18 million of internal-use software
        costs, including $2 million associated with stock-based
        compensation, which is excluded from purchases of fixed assets
        on our consolidated statements of cash flows since it is stock
        based rather than cash; compared with $7 million a year ago.
        These amounts were partially offset by amortization of
        previously capitalized amounts of $10 million and $7 million.

    General and Administrative

    --  General and administrative costs increased due to an $8
        million charge related to possible settlements of outstanding
        litigation, as well as due to increases in payroll and related
        costs, professional fees and legal costs. We expect absolute
        dollars spent in general and administrative to increase over
        time.

    Stock-Based Compensation

    --  Prior to January 1, 2005, we accounted for stock-based awards
        under the intrinsic value method which resulted in
        compensation expense for restricted stock and restricted stock
        units at grant date fair value based on the number of shares
        granted and the quoted price of our common stock, and for
        stock options to the extent option exercise prices were set
        below market prices on the date of grant. Also, stock options
        granted subsequent to December 31, 2002, and stock-based
        awards subject to an exchange offer, other modifications, or
        performance criteria, were subject to variable accounting
        treatment.

    --  We early adopted SFAS No. 123(R) as of January 1, 2005, which
        requires measurement of compensation cost for stock-based
        awards at grant date fair value. The fair value of restricted
        stock and restricted stock units is determined based on the
        number of shares granted and the quoted price of our common
        stock, while the fair value of stock options is determined
        using a Black-Scholes valuation model. The fair value is
        recognized as an expense over the service period, net of
        estimated forfeitures, using the accelerated method under SFAS
        123(R). Because we implemented SFAS 123(R), we no longer have
        stock awards subject to variable accounting treatment.

    --  The requirement of SFAS 123(R) to estimate future forfeitures
        resulted in a cumulative benefit from accounting change of $26
        million which reflects the net cumulative impact of estimating
        forfeitures in the determination of period expense, rather
        than recording forfeitures when they occur as previously
        permitted.

    --  Prior to our adoption of SFAS 123(R), cash retained as a
        result of excess tax deductions relating to stock-based
        compensation was presented in operating cash flows, along with
        other tax cash flows. SFAS 123(R) requires that these excess
        tax benefits be presented as financing cash inflows. Tax
        benefits resulting from stock-based compensation deductions in
        excess of amounts reported for financial reporting purposes
        were $1 million in the first quarter.

    --  Stock-based awards generally vest over service periods of
        between three and six years.

    --  Stock-based compensation was $19 million for the first
        quarter, primarily consisting of $12 million in expense for
        restricted stock unit awards and $7 million for stock options,
        substantially all of which were granted prior to October 2002.
        Under our previous accounting method, our first quarter
        stock-based compensation would have been $5 million.

    --  Payroll tax expense resulting from exercises of stock-based
        awards is a cash expense and is not categorized as stock-based
        compensation.

    --  We granted stock awards, substantially all of which have been
        restricted stock units since October 2002, of 0.5 million
        during the first quarter at a per-share weighted average fair
        value of $39. Our annual stock awards are granted in the
        second quarter.

    --  At March 31, 2005, there were 434 million common shares and
        stock-based awards outstanding, up from 432 million at March
        31, 2004. This total includes all stock-based awards
        outstanding, without regard for estimated forfeitures,
        consisting of vested and unvested awards, and in-the-money and
        out-of-the-money stock options.

    --  At March 31, 2005, there were 24 million stock awards
        outstanding, consisting of 17 million stock options with a $13
        weighted average exercise price and 7 million restricted stock
        units. At March 31, 2004, there were 27 million stock awards
        outstanding.

    Other Operating Expense (Income)

    --  Included in "Other operating expense (income)" are
        restructuring-related expenses or credits and amortization of
        other intangibles.

    --  Amortization of other intangibles was $1 million for first
        quarter 2005, and is expected to be $3 million for the
        remainder of 2005, $4 million in both 2006 and 2007, and $2
        million in 2008, based on intangibles as of March 31, 2005.

    --  We acquired certain companies in March 2005 for an aggregate
        cash purchase price of $18 million. The excess of purchase
        price over the fair value of the net assets acquired was $10
        million and is classified as "Goodwill" on our consolidated
        balance sheets. Acquired other intangibles totaled $8 million
        and have estimated useful lives of between one and four years.
        The results of operations of each of the acquired businesses
        have been included in our consolidated results as of the
        closing date of acquisition. The effect of these acquisitions
        on consolidated net sales and operating income was not
        significant for the first quarter.

    Operating Income

    --  Our income from operations was $108 million, down from $110
        million. This decrease is due to the $14 million impact
        resulting from our early adoption of SFAS 123(R), an $8
        million charge related to possible settlements of outstanding
        litigation, and a $5 million loss for fulfillment assets
        removed from service during first quarter 2005. These items,
        and other operating expense increases, were partially offset
        by a 24% growth in net sales and a 27% increase in gross
        profit.

    Other Income (Expense), Net

    --  Other income of $3 million was primarily a foreign-currency
        gain on interest payable for our 6.875% PEACS.

    Remeasurements and Other

    --  Remeasurement of the principal amount of our 6.875% PEACS from
        Euros to U.S. Dollars resulted in a foreign-currency gain of
        $35 million, compared with a gain of $20 million.

    --  Remeasurement of foreign-currency intercompany balances which
        are to be repaid amongst subsidiaries represented a $14
        million loss, compared with a loss of $3 million.

    Income Taxes and Deferred Tax Assets

    --  Our first quarter 2005 effective tax rate was higher than the
        35% statutory rate primarily due to taxable income associated
        with the first quarter 2005 transfer of certain assets from
        the U.S. to international locations. We expect these asset
        transfers to result in tax expense for financial reporting
        purposes above the statutory rate throughout 2005 and
        beneficially impact our effective tax rate over time. Since we
        have Net Operating Losses ("NOLs") for tax purposes, these
        asset transfers will not have a significant effect on cash
        taxes paid, which we expect to be approximately $25 million in
        2005, compared with $4 million in 2004.

    --  SFAS 109 requires that deferred tax assets be evaluated for
        future realization and reduced by a valuation allowance to the
        extent we believe a portion will not be realized. We consider
        many factors when assessing the likelihood of future
        realization of our deferred tax assets including our recent
        cumulative earnings experience by taxing jurisdiction,
        expectations of future taxable income, the carry-forward
        periods available to us for tax reporting purposes, and other
        relevant factors. Significant judgment is required in making
        this assessment, and it is very difficult to predict when, if
        ever, our assessment may conclude that the remaining portion
        of our deferred tax assets are realizable.

    --  At March 31, 2005, approximately $760 million of our gross
        deferred tax assets were related to approximately $2.4 billion
        of NOLs, the majority of which expire after 2016. Our NOL
        deferred tax assets are reduced by a valuation allowance of
        approximately $510 million due to uncertainty about their
        future realization. The remainder of our deferred tax assets
        relate to temporary timing differences between tax and
        financial reporting.

    --  Substantially all of the unrealized $510 million NOL deferred
        tax assets, if realized, would be credited to "Stockholders'
        equity" rather than results of operations for financial
        reporting purposes since they primarily relate to
        tax-deductible stock-based compensation in excess of amounts
        recognized for financial reporting purposes.

    --  Classification of deferred tax assets between current and
        long-term asset categories is based on the expected timing of
        realization, and the valuation allowance is allocated ratably.

    Net Income

    --  We believe that our reported net income in first quarter 2005
        should not be viewed, on its own, as a material positive
        event, and may not necessarily be predictive of our future
        results for a variety of reasons. For example, the
        remeasurement of our 6.875% PEACS and intercompany balances
        can result in significant gains and charges associated with
        the effect of movements in currency exchange rates.
        Accordingly, we encourage investors to evaluate the effect on
        our operating trends of these items since future changes in
        currency exchange rates may create significant variability in
        our future operating results.

    Foreign Exchange

    --  As our financial reporting currency is the U.S. Dollar, our
        total sales, profit, and operating and free cash flows have
        benefited significantly the past eleven quarters from weakness
        in the U.S. Dollar in comparison to the currencies of our
        international websites. We believe it is important to also
        evaluate our growth rates after the effect of currency
        changes.

    --  The effect on our consolidated statements of operations from
        year-over-year changes in exchange rates versus the U.S.
        Dollar throughout the period is as follows:
                       Q1 2005                      Q1 2004
             ---------------------------- ----------------------------
             At Prior  Exchange           At Prior  Exchange
               Year      Rate      As       Year      Rate      As
             Rates (1) Effect   Reported  Rates (1) Effect   Reported
                          (2)                          (2)
             --------- -------- --------- --------- -------- ---------
                      (in millions, except per share amounts)
Net sales    $1,871.4  $  30.2  $1,901.6  $1,442.9  $  87.4  $1,530.3
Gross profit    452.1      6.4     458.5     343.7     17.1     360.8
Operating
 expenses       346.9      3.8     350.7     239.9     10.5     250.4
Operating
 income         105.2      2.6     107.8     103.8      6.6     110.4
Net interest
 expense and
 other          (17.6)     4.1     (13.5)    (19.0)    (2.4)    (21.4)
Remeasure-
 ments and
 other (3)       (5.9)    19.4      13.5      (0.1)    20.5      20.4
Income
 before
 income
 taxes           81.8     26.0     107.8      84.8     24.6     109.4
Net income       65.7     12.5      78.2      86.5     24.6     111.1
Diluted
 earnings
 per share   $   0.15  $  0.03  $   0.18  $   0.20  $  0.06  $   0.26

    (1) Represents the outcome that would have resulted had currency
        exchange rates in the current period been the same as those in
        effect in the comparable prior year period.
    (2) Represents the increase (decrease) in reported amounts
        resulting from changes in exchange rates from those in effect
        in the comparable prior year period.
    (3) Includes foreign-currency gains (losses) on remeasurement of
        6.875% PEACS and intercompany balances, and realized
        currency-related gains associated with sales of
        Euro-denominated investments held by a U.S. subsidiary.


    Cash Flows and Balance Sheet

    --  Operating cash flows and free cash flows can be volatile and
        are sensitive to many factors, including changes in working
        capital. Working capital at any specific point in time is
        subject to many variables, including world events,
        seasonality, the timing of expense payments, discounts offered
        by vendors, vendor payment terms, and fluctuations in foreign
        exchange rates.

    --  Our cash, cash equivalents, and marketable securities of $1.15
        billion, at fair value, primarily consist of cash, commercial
        paper and short-term securities, asset-backed and agency
        securities, corporate notes and bonds and U.S. Treasury notes
        and bonds. Included are amounts held in foreign currencies of
        $605 million, primarily in Euros, British Pounds, and Yen.

    --  We have pledged $78 million of our marketable securities as
        collateral primarily for standby letters of credit and
        property leases, compared with $86 million as of March 31,
        2004.

    --  "Accounts receivable, net and other current assets" includes
        accounts receivable from merchant partners, vendors and credit
        card companies, interest receivables and $16 million of
        prepaid expenses.

    --  "Other assets" includes, among other things, $15 million of
        deferred issuance costs on long-term debt, $14 million of
        certain equity investments and $13 million of other
        intangibles, net.

    --  "Unearned revenue" is recorded when payments are received from
        third parties in advance of our providing the associated
        service.

    --  Amounts related to restructuring-related leases and other
        commitments due within twelve months are $4 million and are
        included in "Accrued expenses and other current liabilities,"
        and the remaining $8 million is included in "Long-term debt
        and other" on our balance sheet. These amounts are net of
        anticipated sublease income of $19 million (we have signed
        sublease agreements for $12 million).

    --  "Accrued expenses and other current liabilities" includes,
        among other things, liabilities for gift certificates,
        marketing activities, and workforce costs, including accrued
        payroll, vacation, and other benefits.

    --  "Long-term debt and other" primarily includes the following
        (in millions):

                                  Principal    Interest    Principal
                                 at Maturity      Rate     Due Date
                                -------------- --------- -------------

Convertible Subordinated Notes  $      900 (1)  4.750%   February 2009
Premium Adjustable Convertible
 Securities ("PEACS")               635 (2)(3)  6.875%   February 2010
                                 -------------
                                $  1,535 (4)
                                 =============

    (1) Convertible at the holders' option into our common stock at
        $78.0275 per share. We have the right to redeem the
        Convertible Subordinated Notes, in whole or in part, at a
        redemption price of 101.9% of the principal, which decreases
        every February 1st by 47.5 basis points until maturity, plus
        any accrued and unpaid interest.

    (2) In March 2005, we redeemed an aggregate principal amount of
        $265 million, using funds held in a European currency, of our
        PEACS under our January 2004 debt repurchase authorization. No
        redemption premium was required. We recorded a charge of $4
        million, classified in "Remeasurements and other," consisting
        of $2 million in unamortized debt issuance costs and $2
        million relating to unrealized losses from our currency swap
        which was terminated in 2003. Accrued and unpaid interest of
        $1 million was paid at redemption.

    (3) EUR 490 million principal amount, convertible at the holders'
        option into our common stock at EUR 84.883 per share ($110.05
        per share based on the U.S. Dollars per Euro exchange rate as
        of March 31, 2005). We have the right to redeem the PEACS, in
        whole or in part, by paying the principal amount, plus any
        accrued and unpaid interest. We do not hedge any portion of
        the PEACS. The U.S. Dollar equivalent principal, interest, and
        conversion price fluctuates based on the Euro/U.S. Dollar
        exchange ratio. Due to fluctuations in this exchange ratio,
        our principal debt obligation since issuance in February 2000
        has increased by $152 million as of March 31, 2005.

    (4) The "if converted" number of shares associated with our
        convertible debt instruments (approximately 17 million total
        shares) are excluded from diluted shares as their effect is
        antidilutive.
    Legal Proceedings

    --  We previously reported class action complaints filed in 2001
        by holders of our equity and debt securities alleging
        violations of the Securities Act of 1933 (the "1933 Act") and
        the Securities Exchange Act of 1934 (the "1934 Act"). We
        recently signed a Stipulation of Settlement with respect to
        the 1934 Act claims and agreed in principle to settle the 1933
        Act claims. If finalized and approved by the Court, these
        settlements would dispose of all claims asserted in these
        lawsuits in exchange for payments totaling $47.5 million,
        substantially all of which we expect to be funded by our
        insurers.

    Certain Definitions and Other

    --  We present segment information along two lines: North America
        and International. We measure operating results of our
        segments using an internal performance measure of direct
        segment operating expenses that excludes stock-based
        compensation and other operating expenses (income), each of
        which is not allocated to segment results. Other centrally
        incurred operating costs are fully allocated to segment
        results. Our operating results, particularly for the
        International segment, are affected by movements in foreign
        exchange rates.

    --  The North America segment consists of amounts earned from
        retail sales of consumer products (including from third-party
        sellers) through www.amazon.com and www.amazon.ca; from North
        America focused Syndicated Stores, such as www.cdnow.com; from
        our mail-order tool catalog phone orders; from our Amazon
        Prime membership program; and from non-retail activities such
        as North America-focused Merchant.com, marketing, and
        promotional agreements. This segment includes export sales
        from www.amazon.com and www.amazon.ca.

    --  The International segment consists of amounts earned from
        retail sales of consumer products (including from third-party
        sellers) through www.amazon.co.uk , www.amazon.de,
        www.amazon.co.jp, www.amazon.fr, and since September 2004,
        www.joyo.com; from internationally focused Syndicated Stores;
        from our DVD rental service in the U.K.; and from non-retail
        activities such as internationally focused marketing and
        promotional agreements. This segment includes export sales
        from these internationally based sites (including export sales
        from these sites to customers in the U.S. and Canada), but
        excludes export sales from www.amazon.com and www.amazon.ca.

    --  We provide supplemental sales information within each segment
        for three categories: "Media," "Electronics and other general
        merchandise," and "Other." Media consists of amounts earned
        from DVD rental and retail sales from all sellers of books,
        music, DVD/video, magazine subscriptions, software, video
        games, and video game consoles. Electronics and other general
        merchandise consists of amounts earned from retail sales from
        all sellers of items not included in Media, such as
        electronics and office, camera and photo, toys and baby,
        tools, home and garden, apparel, sports and outdoors, kitchen
        and housewares, gourmet food, jewelry, health and personal
        care, beauty, and musical instruments. The Other category
        consists of non-retail activities, such as the Merchant.com
        program and miscellaneous marketing and promotional
        activities, such as our co-branded credit card program.

    --  Operating cycle is number of days of sales in inventory plus
        number of days of sales in accounts receivable minus accounts
        payable days. Inventory days are calculated as the quotient of
        inventory to cost of sales, multiplied by the number of days
        in the period. Accounts payable days are calculated as the
        quotient of accounts payable to cost of sales, multiplied by
        the number of days in the period. Inventory turns are
        calculated as the quotient of cost of sales to average
        inventory over five quarters.

    --  References to customers mean customer accounts, which are
        unique e-mail addresses, established either when a customer's
        initial order is shipped or when a customer orders from
        certain third-party sellers on our websites. Customer accounts
        include customers of Amazon Marketplace, Auctions and zShops,
        and our Merchants@, Syndicated Stores programs, but exclude
        DVD rental customers, customers associated with certain of our
        acquisitions (including Joyo.com customers), Merchant.com
        program customers, Amazon.com Payments customers, our catalog
        customers, and the customers of select companies with whom we
        have a technology alliance or marketing and promotional
        relationship. A customer is considered active when they have
        placed an order during the preceding twelve-month period.

    --  References to sellers or merchants mean active seller
        accounts, which are established when a seller receives an
        order from a customer account. Seller accounts include sellers
        in Amazon Marketplace, Auctions, zShops, and Merchants@
        platforms, but exclude Merchant.com sellers. A seller is
        considered active when they have received an order during the
        preceding twelve-month period.

    --  References to units mean units sold (net of returns and
        cancellations) by us and third-party sellers at Amazon.com
        domains worldwide -- such as www.amazon.com, www.amazon.co.uk,
        www.amazon.de, www.amazon.co.jp, www.amazon.fr, and
        www.amazon.ca -- and at Syndicated Stores domains, as well as
        Amazon.com-owned items sold through catalogs and at
        non-Amazon.com domains, such as books, music, and DVD/video
        items ordered from Amazon.com's store at www.target.com. Units
        sold do not include units associated with certain of our
        acquisitions (including Joyo.com units), Amazon.com gift
        certificates or DVD rentals.

    CONTACT: Amazon.com, Inc.
             Tim Stone, 206-266-2171 (Investor Relations)
             ir@amazon.com
             www.amazon.com/ir
             or
             Patty Smith, 206-266-7180 (Public Relations)

    SOURCE: Amazon.com, Inc.

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