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Amazon.com Fourth Quarter Sales Up 34%

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February 8 – February 15, 2007 Edition

Amazon.com
Fourth Quarter
Sales Up 34%

SEATTLE/2/2/2007—Amazon.com, Inc. (NASDAQ:AMZN) February 1 announced financial results for its fourth quarter and year ended December 31, 2006.

Operating cash flow was $702 million in 2006, compared with $733 million in 2005. Free cash flow decreased 8% to $486 million in 2006, compared with $529 million in 2005.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 436 million on December 31, 2006, compared with 438 million a year ago. During the year, the Company repurchased 8 million shares, or $252 million under its previously announced authorization to repurchase up to $500 million of the Company’s common stock.

Net sales increased 34% to $3.99 billion in the fourth quarter, compared with $2.98 billion in fourth quarter 2005. Excluding the $122 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 30% compared with fourth quarter 2005.

Operating income increased 20% to $197 million in the fourth quarter, compared with $165 million in fourth quarter 2005. Excluding the $8 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income grew 14% compared with fourth quarter 2005.

Net income was $98 million in the fourth quarter, or $0.23 per diluted share, compared with net income of $199 million, or $0.47 per diluted share in fourth quarter 2005. Fourth quarter 2006 income tax expense increased $130 million, to $91 million or $0.22 per diluted share, compared with a tax benefit of $38 million, or $0.09 per diluted share, in fourth quarter 2005. The prior year tax benefit was primarily related to determining certain deferred tax assets were realizable.

“We had a record holiday season with accelerating revenue growth and significant sequential improvement in operating leverage,” said Jeff Bezos, founder and CEO of Amazon.com. “Amazon Prime members spent more with us across categories as they took advantage of unlimited free two-day shipping.”

Amazon Prime, Amazon.com’s first-ever membership program, was introduced in 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. Full Year 2006

Net sales increased 26% to $10.71 billion in 2006, compared with $8.49 billion in 2005.

Operating income declined 10% to $389 million in 2006, compared with $432 million in 2005, due mainly to increased spending on technology and content.

Net income was $190 million in 2006, or $0.45 per diluted share, compared with net income of $359 million, or $0.84 per diluted share, in 2005. Income tax expense increased $92 million to $187 million, or $0.44 per diluted share, compared with income tax expense of $95 million, or $0.22 per diluted share, in 2005.

Highlights Trailing-twelve-month free cash flow increased $119 million compared with third quarter 2006, a sequential improvement of 33%, and trailing-twelve-month operating cash flow improved $115 million compared with the same period. North America segment sales, representing the Company’s U.S. and Canadian sites, were $2.21 billion, up 31% from fourth quarter 2005. International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $1.78 billion, up 37% from fourth quarter 2005. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International net sales growth was 28%. Worldwide Electronics & Other General Merchandise grew 55% to $1.40 billion in fourth quarter 2006, and increased to 35% of worldwide net sales compared with 30% in fourth quarter 2005. For the first time, non-Media dollar growth exceeded Media dollar growth, even though Media grew 25% in the quarter. The Company announced the beta launch of endless.com, its new shoe and handbag website, which features the unusual business practice of free overnight shipping (next business day) on all items. Over 220,000 developers have registered to use Amazon Web Services, up greater than 55% year-over-year. Amazon Enterprise Solutions Europe built and launched a new state-of-the-art multi-channel e-commerce platform for Mothercare PLC, a leading U.K. retailer for parents, using the proven technology and expertise of Amazon to provide the e-commerce engine behind the website, in-store and call center applications.

First Quarter 2007 Guidance Net sales are expected to be between $2.85 billion and $3.00 billion, or to grow between 25% and 32% compared with first quarter 2006. Operating income is expected to be between $82 million and $122 million, or between (22%) decline and 16% growth, compared with first quarter 2006. This guidance includes $38 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to stock-based compensation estimates.

Full Year 2007 Expectations Net sales are expected to be between $13.00 billion and $13.70 billion, or to grow between 21% and 28% compared with 2006. Operating income is expected to be between $355 million and $505 million, or between (9%) decline and 30% growth, compared with 2006. This guidance includes $165 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional intangible assets are recorded and that there are no further revisions to stock-based compensation estimates.

About Amazon.com

Amazon.com, Inc., (Nasdaq: AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth’s Biggest Selection. Amazon.com, Inc. 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 its customers the lowest possible prices. Amazon.com and other 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 and its affiliates operate websites, including www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com.