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Amazon to Add 5,000 Workers, as Worry About Costs Rises

Douglas A. McIntyre

Amazon.com Inc. (AMZN), which announced a loss in its most recent quarter, will add 5,000 new workers, as CEO Jeff Bezos dares Wall Street to desert him. It will not. As has been true for most of the past few years, investors are willing to concede that the founder of the world's largest e-commerce business has a method to his madness.

Bezos's latest move is to add 5,000 new Amazon workers to company warehouses. This is tremendous, given that Amazon's entire employee base is only four times that.

The company disclosed:

Amazon it is creating more than 5,000 new full-time jobs in its U.S. fulfillment network to meet growing customer demand. Median pay inside Amazon fulfillment centers is 30 percent higher than that of people who work in traditional retail stores -- and that doesn't even include the stock grants that full-time employees receive, which over the past five years have added an average of 9% to base pay annually. Amazon employs over 20,000 full-time employees in its U.S. fulfillment centers.

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The news is both good and bad. Amazon would not need to add the jobs if its core business were not doing well. However, if Amazon has started to head in the direction of being a digital media and cloud services company, the job additions take it in another direction. Fulfillment employees are a cousin of the retail workers at Amazon's competitors like Barnes & Noble Inc. (BKS) and Best Buy Co. Inc. (BBY), which have been hampered by bricks-and-mortar operations and real estate costs.

High expenses triggered red ink at Amazon, despite a 22% revenue growth rate last quarter. Ordinarily such a surge in sales would translate in some modest way to net income. However:

Net sales increased 22% to$15.70 billion in the second quarter, compared with $12.83 billion in second quarter 2012. Excluding the $392 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 25% compared with second quarter 2012.

Operating income decreased 26% to $79 million in the second quarter, compared with $107 million in second quarter 2012. The unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter on operating income was $18 million.

Net loss was $7 million in the second quarter, or $0.02 per diluted share, compared with net income of $7 million, or $0.01 per diluted share, in second quarter 2012.

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The stock rose after the announcement.

Investors will have the opportunity to determine whether they prefer Amazon's future in the cloud or its past as a distributor of items sold online.

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