The importance of Amazon's profit

In the end the caveats - pro forma profits, operating profits, net income? - proved unnecessary. Amazon.com made a profit. Full stop.

It may only have been $5m on the back of a $1.1bn worth of sales but it is a major milestone.

Jeff Bezos, who repeatedly said 31 December 2001 (the day the quarter ended) was D-Day for his company, will breathe a sigh of a relief. His 'profits are for whimps' approach of the late 1990s is long gone and today's news is welcome not only for Bezos but for all those other retailers for whom Amazon.com is a bellwether.

The signs have been there. Over the Christmas season Amazon registered 2.5 million visitors compared to 1.5 million in 2000. It's own numbers showed it has processed 37.9 million orders between 9 November and 21 December.

More pertinently, the company has started to make inroads into its large operating costs. A deal last autumn to move from Windows to Linux has - the company claims - reduced IT costs by a quarter. Meanwhile, the hit the company takes for shipping its goods is down by 35 per cent, a figure all the more impressive when you consider this reduction was made on the back of increased sales.

Despite the good news there is still a lot of work to do. Over a third of Amazon's sales happen in the fourth quarter and the company itself isn't too optimistic about the current three-month period. Indeed, we may have to wait 12 months until we see another quarterly profit.

And even then it's worth imposing a note of caution. The fact is Amazon may need a bit of Harry Potter-esque magic next Christmas to repeat the trick. Last month the boy wizard boosted sales with shoppers on all five Amazon sites placing close to half a million orders for books and related products. To put this into context, the next best-selling gift - the Shrek video and DVD - sold just 150,000 copies.

Let's put it another way. J K Rowling's creation contributed - at a conservative estimate - sales of $5m. Now, what was the size of Amazon's profits again?