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Overstock.com falls after surprising 4Q loss

The Associated Press

Shares of Overstock.com Inc. tumbled more than 11 percent Friday after the company reported a fourth-quarter loss on falling sales, lower profit margins and customer confusion over its new Web site.

THE SPARK: Overstock.com said it lost $3.4 million, or 15 cents per share, during the quarter ended Dec. 31. That's down from net income of $14.9 million, or 63 cents per share, during the same period a year before.

Revenue during the quarter fell 10 percent from the year before to $314.1 million, compared to $348.9 million in 2010.

Costs also rose and the company said its gross profit margin fell to 16.2 percent in the quarter from 17 percent in the same period a year before.

THE BIG PICTURE: Overstock said its quarterly results might have been hurt by its effort to rebrand its Web site with the name "O.co."

The company said potential customers might have been confused by the rebranding and had a hard time finding its Web site. Web traffic is key to Overstock.com's business model. The company acts as a kind of online clearinghouse, letting merchants sell surplus items to consumers through its Web site.

President Jonathan Johnson said in an interview that the "O.co" Web address began as a short cut that was used alongside the normal address of Overstock.com.

The company decided to promote the shorter name when it saw that customers were using it more often than the company had expected. But when advertising campaigns began promoting the O.co address, many customers typed O.com, which is not an existing address, Johnson said.

Overstock.com has now largely abandoned the O.co address and uses it mostly for overseas ads and Twitter messages, Johnson said.

SHARE ACTION: Shares of Overstock.com fell 77 cents, or 11.2 percent, to close at $6.11 per share. The stock has been steadily sinking since July, when it traded for nearly $16 a share. Shares have lost 61 percent of their value since then.