Improving Image Is the Bottom Line at Amazon.Com

SEATTLE (AP) - It seemed a surprise move for a company that wasfinally shedding its image as an unrepentant money-loser.

Internet retailer Amazon.com, which posted its first quarterlyprofit last year, announced last month it would voluntarily adopt astricter accounting method for its stock option reporting, a changethat only hurts the bottom line.

But this is a company that has made a career of deflectingattention from its bottom line. And Amazon's decision to startcharging its stock options as an expense against its earnings couldcarry a considerable upside: a public relations makeover in a time ofprofound investor suspicion.

"It's a chance to be a front-runner," said Dan Geiman, an analystwith McAdams Wright Ragen. "In this era or this period of accountingtricks and general mistrust of accounting and the question marksthere - there's going to be some benefit from being open."

The decision comes when accounting scandals and corporatecorruption from Enron Corp. to WorldCom have shaken investors' faithand roiled the stock market.

Meanwhile, investing groups, politicians and others are callingfor reforms, including requiring corporations to report stock optionsas an expense instead of disclosing it as a footnote in the annualreport. Coca-Cola and General Electric are among those heeding callsto make the changes.

Amazon.com founder and chief executive Jeff Bezos said the currentclimate had nothing to do with Amazon's decision to start expensingstock options.

It merely frees up the company to look at more "rational" ways tooffer stock-based compensation, Bezos said. The company can, forexample, choose to average the employee's strike price - the price atwhich they lock in future stock purchases - over 30 days instead oftying it to the day the employee starts work, he said.

"It's something that we looked into years ago and decided not todo because it would require us to expense the options and we didn'tknow how to think about it," he said. "It should have been donesooner, in my opinion."

Open accounting from a company once derided as Amazon.con?

In its early years and during the dot-com boom of the late 1990s,Amazon urged investors to keep a long-term perspective that gettingbig fast was worth the short-term sacrifices of millions of dollarsin losses.

The company has long championed the use of "pro forma" figures -which subtract restructuring charges, one-time costs, and stockoptions - as the best measure of the company's health.

And getting the company to detail how its pro forma numbers eachquarter meshed with numbers reported under Generally AcceptedAccounting Procedures was a battle, recalled Gary Lutin, aninvestment banker who led investor forums in 2001 for the New YorkSociety of Security Analysts' Committee for Corporate Governance. Thecompany started detailing the differences on its financial statementsin 2001.

Amazon said it will start expensing stock options in 2003, so thatit has time to craft other kinds of stock-based compensationpackages, Bezos said.

Under the accounting change, for 2001, the company's net losswould have increased from $567 million to $963 million, or from aloss of $1.56 a share to $2.64 a share.

Analysts said the impact to the bottom line won't change the waythey evaluate the company. They said they will continue to rely onthe pro forma and cash flow numbers to show how the business isprogressing. For their purposes, the change is mostly cosmetic, theysaid.