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Amazon.com Announces Financial Results for Third Quarter 1998

Amazon.com Becomes #1 Online Music Retailer with Sales of $14.4 Million;
First Quarter to Add More Than 1 Million Customers

SEATTLE, WA-(October 28, 1998)-Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for the third quarter of 1998. Net sales were $153.7 million, an increase of 306 percent over net sales of $37.9 million for the third quarter of 1997. Amazon.com also became the #1 online music retailer in its first full quarter of music sales.

Amazon.com reported a third quarter pro forma operating loss of $21.0 million, or 14 percent of net sales, compared to an operating loss of $10.3 million, or 27 percent of net sales, in the prior year. Pro forma net loss of $24.7 million, or $0.49 per share, compared with a net loss of $9.6 million, or $0.21 per share, in the third quarter of 1997. On a GAAP basis, reported third-quarter net loss was $0.90 per share, and included $20.5 million of merger- and acquisition-related costs.

Amazon.com announced that cumulative customer accounts increased by over 1.2 million during the third quarter to nearly 4.5 million at September 30, 1998, an increase of over 377 percent from 940,000 customer accounts at September 30, 1997. Repeat customer orders represented more than 64 percent of orders placed during the quarter ended September 30, 1998.

"We are very grateful to our customers for choosing Amazon.com as their online music store so quickly," said Jeff Bezos, Amazon.com founder and chief executive officer. "We work hard to earn the confidence of our customers. We're known for service, ease of use, selection, and everyday low prices, and these are the reasons our customers have made us the leading online music retailer. Though pleased with these results, we know our growth initiatives will continue to require aggressive investment and entail significant execution challenges."

Recent Highlights

Amazon.com Becomes the #1 Online Music Store, Adds Classical

Third-quarter music sales were $14.4 million, the first full quarter following the June launch of Amazon.com's music store. Amazon.com exited the quarter as the leading online retailer of music less than four months after its launch. Customer response was strong, augmented by the September launch of its classical-music store.

Adding to the success of its overall music store, Amazon.com opened the classical section of this store in early September. The classical section has added more than 47,000 classical and opera CDs to the existing Amazon.com music store, pushing the store's total number of CDs to more than 225,000--25 times the selection of the average physical music store. Amazon.com also introduced a variety of classical-specific features to help shoppers find and discover exactly the right CD, regardless of their familiarity with classical music. Among those features are thousands of classical-music reviews, editors' recommendations for more than 1,000 essential classical and opera CDs, and more than 1,000 narrow-niche classical and opera bestseller lists.

Amazon.com Formally Enters European Book Market

In October Amazon.com formally entered the European market with the launch of new stores in Germany and the United Kingdom. Amazon.de and Amazon.co.uk replaced sites once operated by Telebook in Germany and Bookpages in the U.K. Amazon.com purchased both companies in April. For the first time on a local basis, the stores make available to Europeans a vast selection of titles, guaranteed safety of transactions, unparalleled convenience, and electronic gift certificates for worry-free gift giving. The two sites will significantly reduce the cost and shipping time for thousands of U.S. titles, thanks to a large supply of popular U.S. titles ready for immediate shipment from the U.K. and Germany.

Amazon.de is headquartered and has a distribution center in Regensburg, Germany, with editorial and marketing offices in Munich, Germany. The store initially features over 400,000 titles from German publishers, as well as fast and easy access to nearly 500,000 U.S. titles. Amazon.co.uk is headquartered and has a distribution center in Slough, England. The store carries a complete catalog of over 1.2 million titles from U.K. publishers, along with fast and easy access to over 200,000 U.S. titles. Each store offers speedy delivery and an array of personalization features to better serve book buyers, including instant recommendations.

You can find these sites at www.amazon.de and www.amazon.co.uk.

Amazon.com Acquisitions of PlanetAll and Junglee

In August Amazon.com acquired two companies: PlanetAll and Junglee. PlanetAll provides a unique Web-based address book, calendar, and reminder service. Junglee is the leading provider of advanced Web-based virtual database (VDB) technology that can help shoppers find and discover products on the Internet. Together, these acquisitions are intended to speed Amazon.com's enhancement of the e-commerce experience for its customers.

Amazon.com acquired 100 percent of Junglee and PlanetAll in exchange for equity having an aggregate value of approximately $280 million. The PlanetAll acquisition was accounted for as a pooling-of-interests and, as a result, Amazon.com's financial statements have been restated for all periods presented. The Junglee acquisition was accounted for under the purchase method of accounting, with substantially all of the approximately $180 million purchase price allocated to goodwill and other purchased intangibles. The goodwill and other purchased intangible assets will be amortized on a straight-line basis over lives averaging approximately 3 years.

Growing Associate Relationships

In early September Amazon.com augmented its growing list of Associate relationships when it announced one of the most extensive global merchant programs on the Internet, featuring Amazon.com as the premier book merchant throughout many of Yahoo!'s World sites. Amazon.com Associates now number more than 140,000. Web-site operators continue to prefer Amazon.com for the powerful benefits they receive from Amazon.com's leading traffic, content, customer experience, brand, service, and cross-product capabilities.

About Amazon.com, Inc.

Amazon.com, Inc., Earth's biggest book and music store (NASDAQ: AMZN), opened its virtual doors on the World Wide Web in July 1995. Today, the Amazon.com store offers more than 3 million books, CDs, audiobooks, DVDs, computer games, and other titles, plus easy-to-use search-and-locate features, secure credit-card payment, personalized recommendations, streamlined ordering through 1-Click(SM) technology, and direct shipping. In addition to its U.S.-based bookstore, www.amazon.com, Amazon.com operates two European bookstore Web sites: www.amazon.co.uk in the United Kingdom and www.amazon.de in Germany. Amazon.com also operates PlanetAll (www.planetall.com), a Web-based address book, calendar, and reminder service, and the Internet Movie Database (www.imdb.com), the Web's comprehensive and authoritative source of information on more than 150,000 movies and entertainment programs and 500,000 cast and crew members dating from the birth of film in 1892 to the present.

This announcement contains forward-looking statements that involve risks and uncertainties that include, among others, Amazon.com's limited operating history, anticipated losses, the unpredictability of its future revenues, competition, risks associated with system development and operation risks, management of potential growth, and risks of new business areas, international expansion, business combinations, and strategic alliances. 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, 1997, as amended by the Form 8-K filed September 11, 1998 and quarterly reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998.

Note on Financial Presentation

GAAP financial results are prepared in accordance with generally accepted accounting principles. All of the charges associated with Amazon.com's merger and acquisition activities have been included in the single-income-statement line item titled "merger- and acquisition-related costs" in order to enhance the informational value of the financials and to present the most comparable classifications in the other line items. Among items included in merger- and acquisition-related costs are one-time merger-related costs and purchase-price elements, including amortization of goodwill and other purchased intangibles. Pro forma financial results exclude these merger- and acquisition-related costs.

Amazon.com, Earth's Biggest Bookstore, and 1-Click are either registered trademarks or trademarks of Amazon.com, Inc. All other names mentioned herein may be trademarks of their respective owners.


AMAZON.COM, INC.
Consolidated Statements of Operations

(in thousands, except per share amounts)
			            Quarter Ended         Nine Months Ended
                                     September 30           September 30,
			         1998	      1997        1998         1997
			            (Unaudited)		     (Unaudited) 

Net sales	               $153,698     $37,887     $357,103     $81,747
Cost of sales	                118,823      30,717      276,679      65,842
Gross profit	                 34,875       7,170       80,424      15,905
Operating expenses:							 
  Marketing and sales            37,517      11,516       84,522      23,596
  Product development            13,374       3,998       29,526       8,650
  General and administrative      4,978       1,972       10,342       4,930
  Merger and acquisition
   related costs                 20,512 	  -       25,925           -
    Total operating expenses     76,381      17,486      150,315      37,176 
Loss from operations	        (41,506)    (10,316)     (69,891)    (21,271)
Interest income		          4,754 	688        9,789       1,118 
Interest expense	         (8,419)        (19)     (18,017)        (59)
  Net interest income (expense)  (3,665)        669       (8,228)      1,059 
Net loss		       $(45,171)    $(9,647)    $(78,119)   $(20,212)
Basic and diluted loss per share $(0.90)     $(0.21)      $(1.60)     $(0.48)
Shares used in computation
  of basic and diluted
  loss per share                 50,234      45,865       48,700      42,438

Pro Forma Results Excluding Merger and Acquisition Related Costs
Pro forma loss from operations,
  excluding merger and
  acquisition related costs    $(20,994)   $(10,316)    $(43,966)   $(21,271)
Pro forma net loss,
  excluding merger
  and  acquisition
  related costs                $(24,659)    $(9,647)     $(52,194)  $(20,212)
Pro forma basic
  and diluted loss
  per share,  excluding
  merger and acquisition
  related costs                  $(0.49)     $(0.21)       $(1.07)    $(0.48)
Shares used in computation
  of pro forma basic
  and diluted loss per share     50,234      45,865        48,700     42,438 

Note:  Pro forma results for the quarter and nine months ended
September 30, 1998 and 1997 are presented for informational purposes only.
These results present the operating results of Amazon.com, excluding charges
of $20.5 million and $25.9 million for the quarter and nine months ended
September 30, 1998, respectively, for merger and acquisition related costs
arising from Amazon.com's April 1998 acquisitions of Bookpages, Telebook and
Internet Movie Database, and the August 1998 acquisitions of Junglee and
PlanetAll, and are not prepared in accordance with generally accepted
accounting principles.

                           AMAZON.COM, INC.
                    Consolidated Balance Sheets
	   	(in thousands, except share data)	
	
          			            September 30,  December 31,
		          	                1998	      1997	
           			             (Unaudited)    (Audited) 

ASSETS					
Current Assets:					
  Cash		                                $14,856      $1,876 
  Marketable securities	                        322,404     123,499 
  Inventories		                         19,772       8,971 
  Prepaid expenses and other                     17,625       3,363 
    Total current assets                        374,657     137,709 
Fixed assets, net	                         23,821       9,726 
Deposits and other              	    	    582         169 
Goodwill and other purchased intangibles, net   213,064           -
Deferred charges 	                          7,590       2,240
  Total assets	                               $619,714    $149,844
					
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:					
  Accounts payable		                 $60,046    $33,027 
  Accrued advertising	                          11,857      3,454 
  Other liabilities and accrued expenses          26,868      6,570 
  Current portion of long-term debt                  684      1,500 
    Total current liabilities	                  99,455     44,551 
Long-term debt			                 340,392     76,521 
Long-term portion of capital lease obligation        103        181 
					
					
Stockholders' Equity:		   
Preferred stock, $0.01 par value:
  Authorized shares -- 10,000,000 	
  Issued and outstanding shares  -- none               -   	  -
Common stock, $0.01 par value:				
  Authorized shares -- 300,000,000
  Issued and outstanding shares  -- 52,725,622
   and 48,302,958 shares, respectively               527 	483 
Additional paid-in capital	                 298,322     67,552 
Note receivable from officer for common stock     (1,099)         -
Deferred compensation		                  (2,943)    (1,930)
Other gains (losses)		                     590          -
Accumulated deficit        		        (115,633)   (37,514)
  Total stockholders' equity	                 179,764     28,591 
     Total liabilities & stockholders' equity   $619,714   $149,844 

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