2009 Annual Letter

--- Page 1 --- Ill11111IIllIIIIIIIIIII 1111IllO 10011889 amazon.com ANNUAL REPORT --- Page 2 --- amazon.com 1000 lie\Silsis hefinan nilresults 10100cilethewnulalivr cifecol CitiS 01uslomeieprieneeunpiseek iICi0051110 elietion speedi lelisciedtciiiecoststrucluri 5055COIlchord to ofieiustoin C\orloci in511lhc Thisworkhasbeedon laigosumhei olsmatlentles custor icrdes oted people ro cr5 ho01id11Weaiouofourlowpilcesourichable delicimd sIrok 1011 esobsrnimd tonditois soknow thitsoantilbeiiuch ate in is dsdicated toimprinIntici Sonic inablhiehli htsto009 r1 air iiinS2yen vcyrirt$2Tl billion in009This islIt iihiliri fannotol i0msaisIJwhon tlioy n4hilnon inboO 1iecciIiilow inc rd114yruosaito 92billion in99 Moimsioino aibknoisisantapr ofAmaion Pi11110 isithworidwid menibei lups 519111hointly listsen heuinbo dilIcrntitoin ailahle foimimi diateshpnient giessiniitfiinifii WeidnI ness piittatoi Itho 1112 ill009nicludin AtOonii ivelapii13thy Fi1100 nidSho ii\ppaiel inbin It ishissyeloottishohusux Noscmliwewquied/aplIc onlnuipit solO olssc itusthitsunpioukhopi sosviih liefesi issihle eis nid 01 ni mdditio toour ndle Jasiii\nia idShophop kectu ii lhgpoelinontniucd tooilante ctisOincopericnecisohthelatinIii liiiDenim Sh oilonliii IsirItilim leans us 3iand oi\llukin II 51 lieoeandapaicItenocieated os 12001joalucder9tirnsud tibo ci lln niostothe ehsitc pasidmp entomei isitlusis hoppins copiinco \pp iiiatrlv nmIIc totneirevus add toisobsilc ldvido Saloilioducls tilid letonouwehsirepesentcd 5Or mliii itlesin \rOs Il soomit ie to mnllioi Isherudoball soliiinsirlf dhllnentByin stois nmoithaiorenllicn naqueitcnis ni til Ii liiintconic nctwoi dirchv iiikn ic II uvaila foiIiSops isShipon knoiPieie \nuiiri ofrvi onlin toljMdolinno ails hmuncbnng many is cc ii IcItoOsnoboletli\niai noialDatihisc icemitu Pri Itolotid sikIifdii IiIiMemo Intances vcisool iol SpotInst SireimuigtoAma onloulii 11111 isaiiiili Smmion 515 olsonIinaolto anditslohaliootpimttUb udoiddi 10al 05100 the newNoitlsoiiuI riiaRogisandp1instopissonrcintIm ia ucil lceioiiin 1011 Isontiensinnos utioiand Ii5ick isridbr dlindpeilom intobsl1 idolnan cusa 11101 009thniosci tort illsludinnany enteip1150 ciitomnis is wiiWovIol natnoir thitdOehoksciIncis1mm.iItS Iaso in incltidr 103ofthe110NcisInk 11111is13issoloisnotIan900hbogs ni1171 intl Inici itintlnosspsisdiIni59d1110Wclssluppe Kill IItoisaiothin 05111ics imid 11055P1oItornitill 10diiIeirotIns0 es SeniitIoadci thItUs sowiiiiiiz aisthensuipiiscd hosslittllimosospndllscussi irtin hi il stIllsoidcbatins11010cdiiii 110111il itTo oleirisoIakcthesc tinanr nilotilpitssoron hut believe fhatlotusintminoigtliontidIebIe lOIN otir ti ssisthenostcue livSc101il01111 --- Page 3 --- financialoutputs overtimeOurannualgoalsetting process begins inthefallandconcludes earlyinthenew yearafterwevecompleted ourpeakholiday quarter Ourgoalsetting sessions arelengthy spirited anddetail- oriented Wehavehighbarfortheexperience ourcustomers deserve andsenseofurgencytoimprove that experience Weve beenusing thissameannualprocessformanyyearsFor2010wehave 452 detailed goalswithowners deliverables andtargeted completion datesThese arenot the onlygoalsourteams setforthemselves butthey are the oneswefeelaremostimportant tomonitor Noneofthesegoals are easyandmanywillnotbeachieved without invention Wereview thestatusofeachofthesegoalsseveral timesper year among our senior leadership teamandadd remove andmodify goals asweproceed review ofour current goalsreveals someinterestingstatistics 360of the452goalswillhave direct impact oncustomer experience Thewordrevenue isusedeighttimesandfreecashflowisusedonlyfourtimes In the452goalstheterms net income grossprofitormarginandoperating profitare not usedonce Taken aswhole thesetofgoalsisindicative of our fundamental approach Startwithcustomers andwork backwards Listen tocustomers butdontjust listen tocustomers also invent ontheirbehalfWecantassure youthatwellmeet allofthisyears goalsWehavent inpastyearsHowever wecanassureyouthatwell continue toobsess over customers Wehavestrong conviction that thatapproachinthelongterm iseverybit asgoodforowners asitisforcustomers Asalways attach copyofouroriginal 1997letterOurapproachremains thesameanditsstillDay Jeffrey Bezos Founder andChief Executive Officer Amazon.com Inc April2010 --- Page 4 --- amazon.corn 1997LETTER TO SHAREHOLDERS Reprinted fromthe1997AnnualReport Toour shareholders Amazon.com passedmanymilestones in1997byyear-end wehadserved morethan 1.5million customers yielding 838% revenue growth to$147.8 million andextended ourmarketleadership despite aggressive competitive entry ButthisisDay forthe Internet andifweexecute wellforAmazon.com Todayonline commerce saves customers moneyandprecious timeTomorrow through personalizationonline commerce willaccelerate the veryprocessofdiscovery Amazon.com usesthe Internet tocreate realvalue foritscustomers andbydoingso hopes tocreate anenduring franchise eveninestablished andlargemarkets Wehavewindow ofopportunity aslargerplayersmarshal theresources topursuethe onlineopportunity andascustomers newtopurchasing online arereceptive toforming newrelationships Thecompetitive landscapehas continued toevolve atfastpaceManylarge playershavemoved online with credible offerings andhavedevoted substantialenergyandresources tobuilding awareness traffic andsalesOurgoalistomove quickly tosolidifyandextend our current positionwhilewebegintopursuethe online commerce opportunities inotherareasWeseesubstantialopportunityinthelargemarkets wearetargetingThisstrategyisnot without riskitrequiresserious investment andcrispexecutionagainstestablished franchise leaders Its All About theLongTerm Webelieve that fundamental measure of our success willbetheshareholder valuewecreate overthelong termThisvaluewillbedirect result ofourabilitytoextend andsolidify ourcurrent market leadership position Thestronger ourmarketleadershipthemorepowerful oureconomic model Marketleadership cantranslate directly tohigherrevenue higher profitability greater capital velocityandcorrespondingly stronger returns on invested capital Ourdecisions haveconsistentlyreflected thisfocusWefirstmeasure ourselves intermsof the metrics most indicative of ourmarketleadership customer andrevenue growththedegree towhich ourcustomers continue to purchase fromusonrepeat basisandthestrengthofourbrandWehaveinvested andwillcontinue toinvest aggressively toexpand andleverage ourcustomer base brand andinfrastructure aswemove to establish an enduringfranchise Because of ouremphasis onthelongtermwemaymakedecisions andweightradeoffsdifferentlythan somecompanies Accordingly wewanttosharewithyouourfundamentalmanagementanddecision-making approach sothatyouourshareholders mayconfirm thatitisconsistent withyourinvestment philosophy Wewillcontinue tofocus relentlessly onourcustomers Wewillcontinue tomakeinvestment decisions inlightoflong-term market leadership considerations rather thanshort-term profitability considerations orshort-term Wall Streetreactions Wewillcontinue tomeasure ourprogramsandthe effectiveness of ourinvestments analytically to jettisonthose thatdonotprovide acceptable returns andtostepupourinvestment inthose thatwork bestWewillcontinue tolearnfrombothoursuccesses andourfailures --- Page 5 --- Wewillmakebold rather thantimidinvestment decisions whereweseesufficient probabilityof gainingmarketleadership advantages Someofthese investments willpayoffothers willnotandwe willhavelearned another valuable lesson ineithercase Whenforced tochoose betweenoptimizingtheappearanceofourGAAPaccountingandmaximizing thepresentvalueof future cashflowswelltakethecashflows Wewillshareourstrategic thought processeswithyouwhenwemakeboldchoices tothe extent competitive pressures allow sothatyoumayevaluate foryourselveswhether wearemaking rational long-term leadershipinvestments Wewillworkhardtospendwiselyandmaintain ourlean culture Weunderstand theimportance of continually reinforcingcost-conscious culture particularlyinbusiness incurring net losses Wewillbalance ourfocusongrowthwithemphasis onlong-term profitabilityandcapital management Atthisstagewechoose toprioritize growthbecause webelieve thatscale iscentral toachievingthe potential of our business model Wewillcontinue tofocusonhiringandretainingversatile andtalented employeesandcontinue to weighttheircompensationtostockoptionsrather thancashWeknowoursuccess willbelargely affected byourability to attract andretain motivated employee base eachofwhommustthinklike andtherefore mustactually beanowner Wearent sobold astoclaim thattheabove istherightinvestment philosophybutitsoursandwe would beremiss ifwewerent clearintheapproach wehavetakenandwillcontinue totake Withthisfoundation wewould liketoturntoreview ofourbusiness focus ourprogressin1997andour outlook forthefuture Obsess Over Customers Fromthebeginning ourfocus has beenonoffering ourcustomers compelling valueWerealized thatthe WebwasandstillistheWorldWideWaitTherefore wesetouttooffercustomers something they simply couldnotgetanyotherwayandbegan serving themwithbooksWebrought themmuchmoreselection than waspossibleinphysical storeourstorewouldnowoccupyfootball fields andpresenteditinusefuleasy- to-search andeasy-to-browseformat instoreopen365daysyear24hoursdayWemaintaineddogged focusonimprovingtheshopping experienceandin1997substantiallyenhanced ourstoreWenowoffer customersgiftcertificates ClickSM shoppingandvastlymorereviews content browsing optionsand recommendation features Wedramaticallyloweredprices furtherincreasingcustomer valueWordofmouth remains themostpowerful customeracquisitiontoolwehaveandwearegratefulforthetrustourcustomers haveplacedinusRepeat purchasesandwordofmouth havecombined tomakeAmazon.com themarket leader inonline bookselling Bymanymeasures Amazon.com came longwayin1997 Salesgrewfrom$15.7million in1996to$147.8 million an838%increase Cumulative customer accounts grewfrom18000010 1510000 738%increase Thepercentageof orders fromrepeat customers grewfromover46%inthe fourthquarterof1996to over58%inthesameperiodin1997 Intermsofaudience reachperMediaMetrix ourWebsitewentfrom rankof90thtowithin thetop 20 Weestablishedlong-term relationshipswithmanyimportant strategic partners including America OnlineYahoo Excite Netscape GeoCities AltaVista @Home andProdigy --- Page 6 --- Infrastructure During 1997weworked hardtoexpand ourbusiness infrastructure tosupport thesegreatly increased traffic salesandservice levels Amazon.coms employee basegrewfrom 158to614andwesignificantly strengthened our management team Distribution centercapacity grewfrom50000 to285000 square feetincluding 70%expansion of our Seattle facilities andthelaunch ofoursecond distribution center inDelaware inNovember Inventories rosetoover200000 titles atyear-end enabling ustoimprove availability forourcustomers Ourcashandinvestment balances atyear-end were$125million thanks toourinitialpublic offeringin May1997 and our$75million loanaffording ussubstantialstrategic flexibility OurEmployees Thepastyears success istheproduct oftalented smart hard-working groupandtakegreat pride in being partofthisteamSetting the barhighinourapproach tohiring hasbeenandwillcontinue tobethe singlemostimportant element ofAmazon.coms success Itsnoteasytoworkherewhen interviewpeopletellthemYou canworklong hard orsmartbutat Amazon.com youcant choose twoout ofthree butweareworking tobuildsomething important something thatmatters toourcustomers something thatwecanall tell ourgrandchildren aboutSuchthingsarentmeant to beeasyWeareincredibly fortunate tohavethisgroupofdedicated employees whose sacrifices andpassion buildAmazon.com Goalsfor1998 Wearestillintheearlystages oflearning howtobringnewvalue toourcustomers through Internet commerce andmerchandising Ourgoalremains tocontinue tosolidify andextend ourbrand andcustomer base Thisrequires sustained investment insystemsandinfrastructure tosupport outstanding customer convenience selection andservice whilewegrowWeareplanning toaddmusic toourproduct offeringandovertimewe believe thatotherproducts maybeprudent investments Wealso believe there aresignificant opportunities to better serveourcustomers overseas such asreducing delivery times andbetter tailoring thecustomerexperience Tobecertain bigpartof thechallenge foruswilllienotinfindingnewwaystoexpand ourbusiness butin prioritizing ourinvestments Wenow knowvastlymoreaboutonline commerce thanwhenAmazon.com wasfounded butwestillhave somuch tolearnThough weareoptimistic wemustremain vigilant andmaintain senseofurgencyThe challengesandhurdles wewillfacetomakeourlong-term vision forAmazon.comreality areseveral aggressive capable well-fundedcompetition considerable growth challenges andexecution risk therisksof product andgeographic expansion andtheneedforlarge continuing investments tomeetanexpanding market opportunity However aswevelongsaid onlinebooksellingandonlinecommerce ingeneralshouldprove to bevery largemarket anditslikelythatnumber ofcompanieswillseesignificant benefit Wefeelgoodabout whatwevedoneandevenmoreexcited aboutwhatwewanttodo 1997wasindeed anincredible yearWeatAmazon.com aregrateful toourcustomers for their business and trust toeachotherforourhardworkandtoour shareholders for theirsupport andencouragement Jeffrey Bezos Founder andChief Executive Officer Amazon.com Inc --- Page 7 --- THISPAGEINTENTIONALLY LEFTBLANK --- Page 8 --- UNITED STATES SECURITIES ANDEXCHANGE COMMISSION Washington D.C20549 FORM 10-K MarkOne ANNUAL REPORT PURSUANT TO SECTION 13OR15dOFTHESECURITIES EXCHANGE ACTOF1934 ForthefiscalyearendedDecember 312009 or TRANSITION REPORT PURSUANT TO SECTION 13OR15dOFTHESECURITIES EXCHANGE ACTOF1934 Forthetransition periodfrom to Commission FileNo000.22513 AMAZON.COM INC Exact nameofregistrant asspecified initscharter Delaware 91-1646860 Stateorotherjurisdiction I.R.SEmployer ofincorporation ororganization Identification No 120012thAvenue South Suite1200 Seattle Washington 98144-2734 206266-1000 Address andtelephone number including areacodeofregistrants principal executive offices Securities registered pursuant toSection12bof theAct TitleofEachClass NameofEachExchange onWhichRegistered Common Stock parvalue$01pershare Nasdaq Global SelectMarket Securitiesregistered pursuanttoSection12gof theAct None Indicate bycheckmark iftheregistrantiswell-known seasoned issuer asdefined inRule405of the Securities ActYes No Indicate bycheckmark iftheregistrantisnotrequiredtofilereports pursuanttoSection 13orSection15dofthe Exchange ActYes No Indicate bycheckmarkwhether theregistranthasfiled allreports requiredtobefiledbySection 13or15dof the Securities Exchange Actof1934duringthepreceding12monthsorforsuchshorterperiodthattheregistrant wasrequired tofilesuchreports and hasbeensubject tosuchfilingrequirementsforthepast90daysYes No Indicate bycheckmarkwhether theregistrant hassubmitted electronically andposted onitscorporate Websiteifany everyInteractive DataFilerequired tobesubmitted andposted pursuanttoRule405ofRegulation S-Tduring thepreceding 12monthsorforsuchshorterperiodthattheregistrantwasrequiredtosubmit andpostsuchfiles Yes E1 No Indicate bycheckmark ifdisclosure of delinquent filerspursuant toItem405ofRegulation S-K isnotcontained herein andwillnotbecontained tothe best of registrants knowledgeindefinitiveproxyorinformation statements incorporated by reference inPartIIIofthisForm 10-K oranyamendment tothisForm10-K Indicate bycheckmarkwhether theregistrant islargeaccelerated fileranaccelerated filerornon-accelerated filer Seedefinition ofaccelerated filerandlargeaccelerated filer inRule 12b-2 of theExchange Act Largeaccelerated filer Accelerated filer Non-accelerated filer Indicate bycheckmarkwhether theregistrantisshellcompany asdefined inRule 2b-2 of theExchange ActYes NoI1 Aggregate market value ofvoting stockheldbynon-affiliates oftheregistrant asofJune30 2009 $27774449254 Number ofshares ofcommon stockoutstandingasofJanuary 222010 444546442 DOCUMENTS INCORPORATED BYREFERENCE Theinformationrequired byPartIIIofthisReport tothe extent not setforthherein isincorporated hereinbyreference fromtheregistrantsdefinitive proxystatement relating totheAnnual MeetingofShareholders tobeheldin2010which definitiveproxystatement shallbefiledwith the Securities andExchange Commission within 120daysaftertheendofthe fiscalyeartowhich thisReport relates --- Page 9 --- AMAZON.COM INC FORM 10-K Forthe Fiscal YearEnded December 312009 INDEX Page PART Item Business Item1ARiskFactors ItemlBUnresolved StaffComments15 ItemProperties 16 ItemLegal Proceedings 16 Item Submission of Matters toVoteofSecurity Holders 16 PART II Item Market fortheRegistrants Common Stock Related Shareholder Matters andIssuer Purchases ofEquity Securities17 Item Selected Consolidated Financial Data 18 Item ManagementsDiscussion andAnalysis of Financial Condition andResults ofOperations 19 Item7AQuantitative andQualitative Disclosure About Market Risk 33 Item Financial Statements andSupplementary Data 36 ItemChangesinandDisagreements withAccountants onAccountingandFinancial Disclosure 73 Item9AControls andProcedures73 Item9BOtherInformation75 PART III Item10Directors Executive Officers andCorporate Governance 75 Item11Executive Compensation 75 Item12Security Ownershipof Certain Beneficial Owners andManagement andRelated Shareholder Matters75 Item13CertainRelationshipsandRelated Transactions 75 Item14Principal Accountant FeesandServices 75 PARTIV Item15Exhibits Financial Statement Schedules 75 Signatures 77 --- Page 10 --- AMAZON.COM INC PART Item Business ThisAnnualReport onForm10-Kandthedocumentsincorporatedhereinbyreference contain forward- looking statements basedonexpectations estimates andprojections asofthedateofthisfilingActual results maydiffermaterially fromthoseexpressed inforward-lookingstatements SeeItem1AofPart Risk Factors Amazon.com Incwasincorporatedin1994inthestateofWashington andreincorporated in1996inthe stateofDelaware Our principal corporateoffices arelocated inSeattle Washington Wecompleted ourinitial public offeringinMay1997 and ourcommon stock islistedontheNasdaqGlobal Select Market underthe symbolAMZN AsusedhereinAmazon.com weourandsimilar termsincludeAmazon.com Incandits subsidiaries unless the context indicates otherwise General Amazon.comopeneditsvirtual doorsontheWorldWideWebinJuly1995andoffersEarths Biggest Selection WeseektobeEarths mostcustomer-centriccompanyforthreeprimary customer setsconsumers sellers anddevelopersInaddition wegenerate revenue through co-branded credit cardagreementsandother marketingandpromotional services such asonline advertising Wehaveorganized ouroperations intotwoprincipal segments NorthAmerica andInternational SeeItem of PartIIFinancial Statements andSupplementary DataNote 11Segment Information SeeItem of PartIIManagements Discussion andAnalysisof Financial Condition andResults of OperationsResults of OperationsSupplemental Information forsupplemental information aboutournet sales Consumers Weserveconsumers through ourretailwebsites andfocusonselection price andconvenience Wedesign ourwebsites toenable millions ofunique products tobesoldbyusandbythirdparties across dozens ofproduct categories Wealsomanufacture andsellthe Kindle e-reader Westrive to offer ourcustomers the lowestprices possible through loweveryday product pricing andfreeshipping offers including Amazon Prime andto improve ouroperating efficiencies sothatwecancontinue tolowerpricesforourcustomers Wealsoprovide easy-to-use functionalityfastandreliable fulfillment andtimelycustomer service Wefulfill customer orders innumber ofwaysincluding throughtheU.Sandinternational fulfillment centers andwarehouses thatweoperate throughco-sourced andoutsourcedarrangementsincertain countries andthrough digital delivery Weoperate customer service centers globally which aresupplemented by co-sourcedarrangementsSeeItem of Part Properties Sellers Weofferprogramsthatenable sellers to sell theirproducts onourwebsites andtheirownbranded websites andtofulfillordersthrough usWeare not thesellerofrecord inthesetransactions but instead earnfixedfees revenue share feesper-unit activity fees or somecombination thereof Developers Weservedevelopers through Amazon WebServices whichprovides access totechnology infrastructure thatdevelopers canusetoenable virtually anytypeofbusiness --- Page 11 --- Competition Ourbusinesses arerapidly evolving andintensely competitive Ourcurrent andpotential competitors includephysical-world retailers publishers vendors distributors manufacturers andproducers ofour products otheronlinee-commerce andmobile e-commerce sitesincluding sites that sellordistributedigital content number ofindirectcompetitors including mediacompanies webportals comparison shopping websites andwebsearchengines either directly orincollaboration with other retailers companies that provide e-commerce services including website development fulfillment andcustomer service companies thatprovide infrastructure webservices orotherinformationstorageorcomputingservices orproductsand companies thatdesign manufacture market orselldigitalmedia devices Webelieve thattheprincipal competitive factors inourretailbusinesses include selection price andconvenience including fastandreliable fulfillment Additional competitive factors forourselleranddeveloper services include the quality speedand reliabilityofour services andtoolsManyofour current andpotential competitors havegreater resources longer histories morecustomers andgreaterbrandrecognition Theymaysecure bettertermsfromvendors adopt moreaggressive pricing anddevote moreresources totechnology fulfillment andmarketingOthercompanies alsomayenter intobusiness combinations oralliances thatstrengthentheircompetitive positions Intellectual Property Weregard ourtrademarks service marks copyrights patents domainnames tradedresstradesecrets proprietary technologies andsimilar intellectualproperty ascritical tooursuccess andwerelyontrademark copyright andpatentlawtrade-secret protection andconfidentialityand/or licenseagreements with our employees customers partners andothers toprotect ourproprietary rightsWehaveregistered orapplied for theregistration ofnumber ofU.Sandinternational domainnamestrademarks service marks andcopyrights Additionally wehavefiledU.Sandinternationalpatent applications covering certain of ourproprietary technology Wehavelicensed inthepastandexpectthatwemaylicense inthe future certain of ourproprietary rights tothirdparties Seasonality Ourbusiness isaffected byseasonality which historically hasresulted inhigher salesvolume during our fourthquarter which endsDecember 31Werecognized 39% 35% and38%of our annual revenue duringthe fourthquarterof2009 2008 and2007 Employees Weemployed approximately 24300 full-time andpart-time employeesatDecember 31 2009 However employment levels fluctuate duetoseasonal factors affecting ourbusiness Additionally weutilize independent contractors andtemporary personnel tosupplement ourworkforce particularly onseasonal basisAlthough we haveworks councils andstatutory employee representation obligations incertain countries our employees are notrepresented bylaborunionandweconsider our employee relations to begoodCompetition forqualified personnelinourindustry hashistorically beenintense particularly forsoftwareengineers computer scientists andother technical staff Available Information Ourinvestor relations website iswww.amazon.com/jr Wemakeavailable onthiswebsite freeofcharge ourannualreports onForm10-Kquarterly reports onForm10-Qcurrent reports onForm8-Kand amendments tothosereports assoon asreasonably practicable afterweelectronically fileorfurnish suchmaterials totheU.S Securities andExchange CommissionSEC Wealsomakeavailable onthiswebsite under theheading Corporate Governance ourCodeofBusiness Conduct andEthics --- Page 12 --- Executive Officers andDirectors Thefollowingtables set forth certain informationregardingourExecutive Officers andDirectors asof January 192010 Executive Officers Name Age __ Jeffrey Bezos 46 Jeffrey Blackburn 40 Sebastian Gunningham 47 AndrewJassy42 Steven Kessel 44 Marc Onetto 59 Diego Piacentini 49 Shelley Reynolds45 Thomas Szkutak 49 Brian Valentine 50 Jeffrey Wilke 43 Michelle Wilson 46 Jeffrey BezosMrBezos hasbeenChairman of theBoard ofAmazon.com sincefoundingitin1994 andChiefExecutive Officer sinceMay1996MrBezos served asPresident of the Company fromfounding until June 1999 andagainfromOctober 2000tothepresent Jeffrey Blackburn MrBlackburn has served asSeniorVicePresident Business Development since April2006 From June2004toApril2006 hewasVicePresident Business Development Sebastian Gunningham MrGunningham has served asSeniorVicePresident Seller Services since joiningAmazon.com inMarch2007PriortojoiningAmazon.com MrGunningham wasPresident of FirstData Utilities fromAugust2006toFebruary 2007followingFirstDatasacquisitionofPeaceSoftware Incwhere hewasChief Executive Officer fromFebruary2004 toAugust2006 Andrew JassyMrJassyhas served asSeniorVicePresident WebServices sinceApril2006 From January2005toApril2006 hewasVicePresident WebServices Steven KesselMrKessel has served asSeniorVicePresident Worldwide DigitalMedia sinceApril 2006 From April2004 toApril2006 hewasVicePresident Digital Marc Onetto MrOnetto has served asSeniorVicePresident WorldwideOperationssincejoining Amazon.com inDecember 2006PriortojoiningAmazon.com MrOnetto wasExecutive VicePresident Worldwide Operations atSolectron Corporation anelectronics manufacturing andtechnology company from June2003 toJune2006 Diego Piacentini MrPiacentini has served asSeniorVicePresident International Retail sinceJanuary 2007 From November 2001 toDecember 2006MrPiacentini served asSeniorVicePresident Worldwide Retail andMarketing Shelley Reynolds MsReynoldshas served asVicePresident Worldwide Controller andPrincipal Accounting Officer sinceApril2007 FromFebruary2006toApril2007 shewasVicePresident Finance and Controller Prior tojoiningAmazon.com MsReynolds waspartner atDeloitte Touche LLPsince1998 Thomas Szkutak MrSzkutak has served asSeniorVicePresident andChief Financial Officer since joiningAmazon.com inOctober 2002Position President ChiefExecutive Officer andChairman of theBoard SeniorVicePresident Business Development SeniorVicePresident Seller Services SeniorVicePresident WebServices SeniorVicePresident Worldwide Digital Media SeniorVicePresident WorldwideOperations SeniorVicePresident International Retail VicePresident Worldwide Controller andPrincipal Accounting Officer SeniorVicePresident andChief Financial Officer SeniorVicePresident Ecommerce Platform SeniorVicePresident NorthAmerica Retail SeniorVicePresident General Counsel andSecretary --- Page 13 --- BrianValentine MrValentine has served asSenior VicePresident Ecommerce Platform since joiningAmazon.com inSeptember 2006PriortojoiningAmazon.com MrValentine held various positions withMicrosoft Corporation includingSenior VicePresident Windows CoreOperating System Division from January 2004toSeptember 2006 Jeffrey WilkeMrWilke has served asSeniorVicePresident NorthAmerica Retail sinceJanuary 2007 FromJanuary2002 toDecember 2006 hewasSenior VicePresident Worldwide Operations Michelle Wilson MsWilson hasserved asSeniorVicePresident General Counsel andSecretary sinceJuly2003 Board of Directors NameAge Position Jeffrey Bezos 46President Chief Executive Officer andChairman oftheBoard Tom Alberg 69Managing Director Madrona Venture Group JohnSeelyBrown 69VisitingScholar andAdvisor totheProvost UniversityofSouthern California JohnDoerr 58Partner Kleiner Perkins CaufieldByers William Gordon 59Partner Kleiner Perkins CaufieldByers AlainMonié 59President andChiefOperating Officer Ingram MicroInc Thomas Ryder 65Retired Former Chairman Readers Digest Association Inc Patricia Stonesifer 53ChairBoard ofRegents Smithsonian Institution Item1ARiskFactors Please carefullyconsider thefollowing riskfactors Ifanyofthefollowing risksoccur ourbusiness financialcondition operating results andcashflows could bematerially adversely affected Inaddition the current global ecOnomic climate amplifies manyoftheserisks WeFaceIntense Competition Ourbusinesses arerapidly evolvingandintensely competitive andwehavemanycompetitors indifferent industries including retaile-commerce services digital content anddigitalmedia devices andwebservices Manyofour current andpotential competitors havegreater resources longer histories morecustomersand greaterbrandrecognition Theymaysecure bettertermsfromvendors adoptmoreaggressive pricing anddevote moreresources totechnology fulfillment andmarketing Competition mayintensify asourcompetitors enter intobusiness combinations oralliances andestablished companies inothermarketsegments expand intoourmarket segments Inaddition newand enhanced technologies including searchwebservices anddigitalmayincrease ourcompetitionTheInternet facilitates competitive entryandcomparison shopping andincreasedcompetition mayreduce oursalesandprofits OurExpansion PlacesSignificant Strain onourManagement Operational Financial andOther Resources Wearerapidly andsignificantly expanding ourglobal operations including increasing ourproduct and service offerings andscaling ourinfrastructure tosupport ourretailandservices businesses Thisexpansion increases thecomplexityofourbusiness andplaces significant strainonourmanagement personnel operations systems technical performance financialresources andinternal financial control andreporting functions We maynotbeabletomanage growth effectively which coulddamage ourreputation limitourgrowthand negativelyaffectouroperating results --- Page 14 --- OurExpansion intoNewProducts Services Technologies andGeographic Regions Subjects Usto Additional Business Legal Financial andCompetitive Risks Wemayhavelimited ornoexperience inournewermarket segmentsandourcustomers maynotadoptour newproduct orservice offerings which include sellerservices digitalwebservices andelectronic devices Theseofferings maypresentnewanddifficult technology challenges andwemaybesubject toclaims if customers oftheseofferings experience service disruptions orfailures orotherqualityissues In addition profitability ifanyinournewer activities maybelower thaninourolder activities andwemaynotbe successfulenoughinthesenewer activities torecoupourinvestments inthemIfanyofthisweretooccurit coulddamage ourreputationlimitourgrowth andnegatively affectouroperating results WeMayExperience SignificantFluctuations inOurOperating ResultsandGrowth Rate Wemaynotbeabletoaccuratelyforecast ourgrowth rateWebaseourexpenselevelsandinvestmentplans onsalesestimatessignificant portionofourexpensesandinvestments isfixedandwemaynotbeableto adjust our spending quickly enough ifoursalesarelessthanexpected Ourrevenue growthmaynotbesustainable andourpercentage growthratesmaydecrease Ourrevenue andoperating profitgrowth depends onthecontinued growth ofdemand fortheproductsandservices offered by usor oursellers andourbusiness isaffected bygeneral economic andbusiness conditions worldwide softeningofdemand whether caused bychanges incustomerpreferences orweakening of theU.Sorglobal economies mayresult indecreased revenue orgrowth Ournetsalesandoperatingresults willalsofluctuate formanyotherreasons including dueto risks described elsewhere in this section andthefollowing ourability to retain andincrease salestoexisting customers attractnewcustomers andsatisfy our customers demands ourability to retain andexpand ournetwork ofsellers ourabilityto offerproducts onfavorable terms manage inventoryandfulfillorders the introduction ofcompetitive websites products services pricedecreases orimprovements changesinusageoftheInternet ande-commerce includinginnon-U.S markets timing effectiveness andcosts ofexpansionandupgrades of oursystemsandinfrastructure thesuccess of ourgeographic service andproductlineexpansions theoutcomes oflegalproceedings andclaims variations inthemixofproducts andservices wesell variations inourlevelofmerchandise andvendor returns the extent towhichweofferfreeshipping continue toreduce product pricesworldwide andprovide additional benefits toourcustomers theextent towhichweinvest intechnologyandcontent fulfillment andotherexpense categories increases inthepricesoffuelandgasoline aswell asincreases inthepricesof otherenergy products andcommodities likepaperandpacking supplies theextent towhich operators of the networks between ourcustomers andourwebsites successfully charge feestograntourcustomers unimpaired andunconstrained access toour online services ourability to collect amounts owed touswhentheybecome due theextent towhich useofourservices isaffected byspyware viruses phishingandotherspamemails denial of service attacks datatheftcomputer intrusions andsimilar events and terrorist attacks andarmed hostilities --- Page 15 --- WeMayNotBeSuccessfulinOurEfforts toExpand intoInternational Market Segments Ourinternational activities aresignificanttoourrevenues andprofits andweplanto further expand internationallyIn certain international market segments wehaverelatively littleoperating experienceandmay notbenefit fromanyfirst-to-marketadvantagesor otherwise succeed Itiscostly toestablish developand maintain internationaloperationsandwebsites andpromoteourbrandinternationally Ourinternational operations maynotbeprofitable onsustained basis In addition to risks described elsewhere in this section our international salesandoperations aresubject to number ofrisksincluding localeconomic andpolitical conditions government regulationofc-commerceother online services andelectronic devices andrestrictive governmentalactions such astradeprotection measures including exportdutiesandquotasandcustom dutiesandtariffsnationalization andrestrictions onforeign ownership restrictions onsalesordistribution of certain products or services anduncertainty regarding liabilityfor productsservices andcontent including uncertainty asresultoflessInternet-friendly legalsystems locallawslack oflegalprecedentandvarying rulesregulations andpractices regarding thephysical anddigitaldistribution ofmediaproductsandenforcement ofintellectualproperty rights businesslicensing orcertificationrequirementssuchasforimports exportsandelectronic devices limitations ontherepatriationandinvestment offundsandforeign currency exchange restrictions limited fulfillment andtechnology infrastructure shorter payableandlongerreceivablecyclesandtheresultant negative impact oncashflow lawsandregulations regarding consumer anddataprotection privacy network security encryption and restrictions onpricing or discounts lower levelsofuseof theInternet lower levelsofconsumer spending andfeweropportunities forgrowth compared totheU.S lower levelsofcredit cardusageandincreased payment risk difficultyinstaffing developingandmanaging foreign operations asresultof distance languageand cultural differences different employee/employer relationshipsandthe existence of workers councils andlaborunions lawsandpoliciesof theU.Sandotherjurisdictions affecting tradeforeign investment loansandtaxes and geopolitical events including warandterrorism Astheinternational c-commerce channel grows competitionwillintensifyLocalcompanies mayhave substantialcompetitive advantagebecause oftheirgreater understanding ofandfocusonthelocalcustomer as well astheirmoreestablished localbrandnamesWemaynotbeabletohiretrainretain andmanage required personnel whichmaylimitourinternational growth In2004weacquired Joyo.com Limited which isorganizedunderthelawsof the British Virgin Islands and through Peoples RepublicofChinaPRC entity provides technologyandservices fortheJoyoAmazon websites ThePRCregulates JoyoAmazons businessthrough regulationsandlicense requirements restricting foreign investment intheInternet retailanddelivery sectors iiInternet content andiiithesaleofmedia andotherproductsInorder tomeet localownershipandregulatory licensing requirements JoyoAmazons business isoperated byPRCcompaniesowned bynominee shareholders whoarePRCnationals Although we