Photo: Amazon.com founder and CEO Jeff Bezos (AP).

Seattle, WA (Tuesday, July 26, 2005) -- Amazon.com Inc. said Tuesday its second-quarter earnings sagged 32 per cent from a year ago despite brisk sales at home and abroad, but higher operating profits sent the stock surging in after-hours trading.

The Internet retailer said net income for the three months that ended June 30 was $52 million US or 12 cents per share, down from $76 million, or 18 cents a share for the second quarter of 2004. Sales were $1.75 billion, up 26 per cent from $1.39 billion at the same point last year.

The company's gross profit - net sales minus the cost of those sales - rose to $450 million, up from $341 million at this time last year.

Shares in Amazon.com fell 21 cents to close at $37.74 Tuesday on the Nasdaq Stock Market. In after-hours trading, the shares rose $3.61, or 9.6 per cent, to $41.35.

Scott Devitt, an analyst with Legg Mason Wood Walker, pointed to strong sales from independent merchants hawking their wares on Amazon.com.

"Third-party sales were very strong," Devitt said. "That, in my view, is what generated so much upside to the gross-profit numbers."

Amazon.com's chief financial officer, Tom Szkutak, said third-party sales accounted for 28 per cent of Amazon.com's revenue -- up from 24 per cent at this time last year.

The results, which were released after the stock market closed for regular trading, included a $56 million income tax expense and other one-time costs that Wall Street analysts did not factor into their projections.

On average, analysts polled by Thomson Financial were expecting earnings of 10 cents a share on revenue of $1.73 billion.

For the past 52 weeks, the stock has ranged from $30.60 to $45.68.

Amazon said it expects sales of $1.76 billion to $1.91 billion in the quarter that ends Sept. 30, an increase of 20 per cent to 31 per cent from a year earlier.

The company started out as a virtual bookstore 10 years ago, and is now one of the world's largest e-tailers, selling everything from loose diamonds to lobsters.