Tim Stone, Vice President of Investor Relations Thomas J. Szkutak, Senior Vice President and Chief Financial Officer Jeffrey P. Bezos, Chairman and Chief Executive Officer

Anthony Noto, Goldman Sachs Robert Peck, Bear Stearns Heath Terry, Credit Suisse Asset Management Paul Keung, CIBC World Markets Jeetil Patel, Deutsche Bank Safa Rashtchy, Piper Jaffray Jim Friedland, SG Cowen Imran Khan, JP Morgan Mark Rowen, Prudential Justin Post, Merrill Lynch

Thank you for standing by. Good day everyone and welcome to today’s Amazon.com Fourth Quarter 2005 Financial Results Conference. As a reminder, today’s call is being recorded. For opening remarks and introductions, I’d like to turn the conference over to the Vice president of Investor Relations, Mr. Tim Stone, please go ahead sir. Tim Stone, Vice President of Investor Relations: Hello, welcome to our Q4 ’05 financial results conference call. Joining us today are Tom Szkutak, our CFO, Jeff Bezos, our Chairman and CEO and Tom will both be available for Q&A. The following discussion or responses to your questions reflect management’s views as of today, February 2, 2006 only and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results as included in today’s press release and our filings with the SEC, including our 2004 Annual Report on Form 10-K. As you listen to today’s call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, we’ll discuss certain non-GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on IR website, you’ll find additional disclosures regarding these non-GAAP measures, including the reconciliation to these measures of comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2004. Now, I’ll turn the call over to Tom. INSERT FIRST PART OF TRANSCRIPT HERE. AFTER FIRST SPEAKER INSERT THIS:

: Thomas J. Szkutak, Senior Vice President and Chief Financial Officer: Thanks, Tim. This was another successful year for Amazon.com. We significantly expanded our live proposition for customers and we are grateful to our customers, our global teams and our partners for helping deliver these results. Let me start by reviewing 2005 in full. Trailing twelve months free cash flow grew 11% to a record $529 million. Trailing twelve months free cash flow includes a one-time payment of $40 million in connection with a patent lawsuit settlement in Q3 of ’05. Excluding this settlement, 2005 free cash flow grew 19% to $569 million. Free cash flow is operating cash flow minus capital expenditures. As a reminder, the financial measures we are working to maximize over the long-term is free cash flow per share. The combination of common stock and stock-based awards outstanding with 438 million shares compared with 434 million shares of 1%. Stock-based awards outstanding were 22 million or 5.2% of shares outstanding, down from 25 or 6% of shares outstanding. Return on invested capital was 34%; ROIC is TTM free cash flow divided by average total assets minus average current liability. Revenue grew 23% to $8.49 billion or 24% excluding the $73 million unfavorable impact from year-over-year changes in foreign exchange rates. US market grew 22% to 4.7 billion and International grew 23% to 3.8 billion 25% year-over-year growth excluding year-over-year changes in foreign exchange rates. Gross profit grew 27% to 2.04 billion and gross margin increased 87 basis points to 24%. Consolidated segment operating income grew 16% to $566 million or 17% excluding $8 million of unfavorable year-over-year impact of foreign exchange. And operating margins decreased 41 basis points to 6.7%. Turning to the balance sheet. Cash and marketable securities increased $221 million to $2.0 billion. In Q1 of ’05 we repurchased €200 millions of our convertible debt. And as separately announced today, we will be redeeming €250 million, or approximately $300 million at recent euro/dollar exchange rates, a principal amount of our €6.78 (ph) denominated convertible debt notes to 2000 incentive parts was accrued in unpaid interest. This redemption mitigates potential solution of over 2.9 million shares and reduces our annual cash interest expense by approximately $21 million. Inventory increased 18% or $556 million and inventory turns decreased from 16 to 14 as we bolstered inventory levels for customers by optimizing in stock levels across product categories and expanding the process of product category selection in our performance centers. We will continue to increase our direct buying efforts in existing and new product categories enabling us to extend even lower prices to customers. Our investment in fixed assets, which includes net capitalized software development costs, increased to $101 million from a year ago to $348 million, of which $87 million is capitalized software development cost. Our 2005 capital expenditures were $204 million, of which $79 million were software development cost. Now I’ll discuss the fourth quarter. Revenue grew 17% to $2.98 billion or 22% excluding $121 million of unfavorable year-over-year impact from foreign exchange. Worldwide unit growth for the quarter was also at 22%. Third party units representing marketplace and merchandise units sold on Amazon sites were 28% of total units, up from 26%. For the first time North America Media surpassed $1 billion and North America Electronics and General Merchandise exceeded $500 million. The Worldwide Electronics and other General Merchandise increased 31% to $901 million or 36% excluding of that, representing 30% of worldwide sales, up from 27%. Active customer accounts, representing customers who ordered in the past year, surpassed 55 million, up 19%. Gross profit grew 23% to $667 million, and gross margin increased 98 basis points to 22.4% primarily due to increased third-party sales, changes in the geographic mix of business, and $19 million increase in other revenue primarily Amazon enterprise solutions formerly known as merchant.com, partially offset by greater shipping loss driven by free shipping in Amazon Prime, our lower product prices and continued mix shift of EGM. In Q4, we offered free short-term membership trails for Amazon clients and although they are expensive we expect to continue offering of these trails to our customer base in the future. Now, I will discuss operating expenses excluding stock-based compensation expense under FAS 123R, which we adopted early in Q1 of ‘05. Fulfillment, marketing, technology and content and G&A combined was $482 million or 16.2% of sales, up 175 basis points. Fulfillment was $246 million or 8.3% of sales, up 26 basis points. In 2005, we expanded our fulfillment capacity through efficiency gains as well as increases in leased warehouse space in order to accommodate greater selection and meet anticipated shipment volumes from ourselves as well as third parties for whom we provide the fulfillment. In 2006, we expect to increase our performance base less than in 2005 to expand our capacity to touch that peak demand. For example, we intend to expand our warehouse space in Germany. Marketing was $67 million or 2.2% of sales, roughly flat as a percentage of sales year-over-year. Technology and content was $123 million or 4.1% of sales, up 127 basis points as we continue to hire computer scientists and software engineers to further innovate for customers in areas such as our Seller Platforms, Search, Web Services and Digital. Q4 ’05 represents an annual run-rate of approximately $500 million as we enter 2006. In 2006, we will continue investing in our long-term opportunities, innovating on behalf of customers. We expect technology and content cost to continue to grow in absolute dollars, and our 2006 year-over-year percentage growth rate to be lower in 2005. G&A was $46 million or 1.5% of sales, up 27 basis points. G&A cost increased primarily due to payroll and related expenses, professional fees and legal cost. Now I’ll talk about our segment results. Consistent with prior periods we don’t allocate stock-based compensation or other operating expenses to our segments. In the North America segment, revenue grew 21% to $1.7 billion. Media grew 16% to $1 billion, and EGM grew 29% to $580 million representing 34% of North America revenues, up from 32%. Apparels, Jewelry and Sporting Goods revenue all more than doubled year-over-year. Other revenue was up 25% primarily from Amazon enterprise solutions. Gross profit grew 18% to $418 million, and gross margin decreased 64 basis points to 24.8% largely due to Amazon Prime and free shipping products and service mix and our price reductions across product categories partially offset by third party sales. North America segment operating income increased $30 million to $92 million or 5.5% operating margin. In the International segment revenue grew 13% to $1.3 billion. Revenue growth was 23% adjusting for the $122 million unfavorable impact from foreign exchange during the quarter. Media revenue grew 6% to 968 million, or 16% excluding the foreign exchange rates. EGM grew 36% to $321 million or 49% excluding FX representing 25% of international revenues up from 21%. Gross profit grew 31% to $249 million of gross margin increase of 273 basis points to 19.3% primarily from an increase of third party sales and from vendor management including discounts from suppliers, partially offset by increased free shipping, product price reductions and product mix shift. International segment operating income increased $37 million to $93 million, and operating margin increased 233 basis points to 7.1%. This important to our numbers that are significant majority by technology and content costs are incurred in US with most of them allocated to the North America segment. The combination of operating income and our North America and international segment is a consolidated segment operating income or CSOI. Our segment information financial statement in our press release reconciles CSOI to GAAP operating income. CSOI grew 4% to $185 million or 11% excluding this $12 million unfavorable year-over-year impact from foreign exchange rate. Unlike CSOI our GAAP operating income includes stock-based compensation expense and other operating expense. GAAP operating income increased 1% to $165 million; excluding the $12 million impact from year-over-year changes in foreign exchange rates operating income increased 9% to a $176 million. Our positions for income taxes includes a tax benefit of $90 million in Q4 of ’05 or $0.21 per diluted share related to our determination at certain of our deferred tax assets are realizable. Without the benefit of this change, our effective tax rate was 43% in 2005, higher than the 35% statutory rate. Resulting from the transfer of certain operating assets from the US to international locations in connection with establishing our EU headquarters in Luxembourg. We will transfer additional assets in 2006 to finalize the European headquarters transition, and we will expect this will result in an effective tax rate significantly higher than the statutory rate for 2006. But we have deferred tax assets related to our NOLs, these active transfers will not have a significant impact on our cash taxes paid in 2006, which we expect to be approximately $25 million compared with $12 million in 2005. We are endeavoring to optimize our global taxes on a cash pay basis not for tax expense on a financial reporting basis. GAAP net income was $199 million or $0.47 per diluted share compared with $347 million or $0.82 per diluted share. Excluding the $90 million tax benefit in 2005, and the $244 million tax benefit in 2004 GAAP net income would have been $110 million or $0.26 per diluted share in Q4 of ’05 and $102 million or $0.24 per diluted share in Q4 of ’04. Our growth continues to be fueled by our relentless focus on the primary inputs of customer experience: convenience, selection and price. Some recent examples of our progress include Amazon Prime. We continue to be pleased with the Amazon Prime results, subscriptions to Amazon Prime more than doubled from November to December. We’ve seen increased purchases by Amazon Prime customers across more categories, with especially heavy purchases in electronics, kitchen, and health and personal care. For $79 a year, Amazon Prime members get all-you-can-eat free 2-day shipping. Our Search Inside the Book technology is now available in six geographies, most recently in Japan, where customers can preview the tax inside over a 160,000 books. Building on our successful Search Inside the Book technology, the digital team also announced it is currently developing two innovative programs: Amazon Pages, and Amazon Upgrade, to benefit readers, authors and publishers, it will enable customers to purchase online access to any page, section or chapter of a book as well as the book in its entirety. Our German site amazon.de, launched it press delivery in Q4 giving customers the ability order eligible products by 7:30 PM for guaranteed delivery by noon the next day. Worldwide active seller accounts, merchants with an order from the customer during the preceding 12 months exceeded 1.05 million, up 24% year-over-year. Amazon’s China site joyo.com, in a long-term test lowered the older site threshold for customers to qualify for free shipping from RMB99 to RMB200, and offers more than 300,000 books music, video and DVD titles, making it the largest Chinese book store in the world. Amazon’s Japan site, amazon.co.jp launched its sport store with over 100,000 items and more than 600 brands across 17 categories, including baseball, golf and soccer. Some price highlights include the average customer discounts across book, music and video products purchased on www.amazon.com increased over 175 basis points year-over-year. The average customer discount for electronics products on www.amazon.com increased over 50 basis points year-over-year. Customers saved over $475 million on shipping through our worldwide free shipping offers in Amazon Prime in 2005. I will conclude my portion of today’s call with guidance. Incorporated into our guidance are the order trends that we have seen to date and what we believe today to be appropriately conservative assumptions. However, there is a high level of uncertainty surrounding fluctuation in the Euro, Pound, Yen, Canadian Dollar and Yuan exchange rates, as well as the global economy and consumer spending and the impact on both of world events. While we are cautiously optimistic, it is not possible to accurately predict demand and therefore our actual results could differ materially from our guidance. Let me also remind everyone that we mark our euro-denominated debt-to-market at the end of each quarter, which results in a gain or loss for any movement in the euro between reporting dates. We also have Euro exposure related to our interest expense on this Euro-denominated debt. We incur a foreign currency gain or loss corresponding with inter-company balances denominated in foreign currencies, which is settled among subsidiaries. Depending on the amount and timing and unfavorable resolution of outstanding legal matters could materially affect our business, results of operations, financial position or cash flows in a particular period. Our effective tax rate in 2006 is subject to significant variation based on changes in our corporate structure and business operations, the amount of expenses incurred that are permanently non-deductible for US tax purposes, such as stock-based compensation paid to foreign employees, the tax characterization of income earned and changes in current tax laws and estimates, including variability and predicting our taxable income in the taxable jurisdictions to which you relate. Our guidance assumes that we don’t record any additional intangible assets or any further revisions to stock-based compensation or restructuring-related estimates, and that FX rates remain approximately where they have been recently. For our Q1, we expect net sales of between $2.14 billion and $2.29 billion, or growth of between 13% and 20%. This guidance anticipates more than 75 million or over 400 basis points of negative impacts from foreign exchange due to the dollar’s continued strength. GAAP operating income to be between 70 million and 105 million, or between a negative 35% and negative 3% decline. This includes stock-based compensation and amortization of intangible assets of approximately $30 million. We anticipate consolidated segment operating income, which includes the negative impact of foreign exchange and excludes stock-based compensation and other operating expense to be between $100 million and $135 million or between a negative 22% decline and 5% growth. For calendar year 2006, we expect net sales of between $9.85 billion and $10.45 billion, a growth of between 16% and 23%. This guidance anticipates approximately $100 million or over a 100 basis points of negative impact from foreign exchange rates. GAAP operating income to be between $370 million and $510 million or between a 14% decline and an 18% growth. This includes approximately $135 million for stock-based compensation and amortization of intangible assets. We anticipate consolidated segment operating income, which includes the negative impact of foreign exchange and excludes stock-based compensation and other operating expense to be between $505 million and $645 million or 11% decline and 14% growth. Operating leverage should accelerate in second half of the year compared with the first half of the year. We expect our 2006 free cash flow growth rate to trend similar to the operating profit growth rate year-over-year. This excludes the impact of FAS 123R, which may result in upto $100 million of tax benefits from stock-based compensation to be classified as positive financing cash flows instead of operating cash flows up from $7 million in 2005. And we expect capital expenditures including capitalized software development cost to be approximately $225 million. Our strategy is to remain relevantly focused on customer experience with our financial focus on long-term growth of free cash flow per share. We believe the investments we have made and will make in 2006 in the form of lower prices and free shipping as well as investments in further technology innovation of the right investments for future free cash flow. In the last 4 years, we’ve generated nearly $1.5 billion in free cash flow while investing $1.1 billion in technology and content, and customer saved over $1.25 billion on shipping since we’ve made free shipping a permanent offer and introduced Amazon Prime for customers, on top of our prices which continue to lower. We will continue to strive for year-over-year annual growth of free cash flow and free cash flow per share on investing in our long-term opportunities. We are confident that we’ll continue to improve customer experience and execute efficiently our value proposition as well as our free cash flow will further expand. Thanks and with that Tim let’s move to questions. Tim Stone, Vice President, Investor Relations: Great thanks Tom. Let’s move on to the Q&A portion of the call, Jeff and Tom. Operator will you please remind once more of the Q&A process?

Thank you, Mr. Stone. If you would ask a question please do so by pressing the “*�? key followed by the digit “1�? on your touchtone telephone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We’ll proceed in the order that you signal us and we’ll take as many questions as time permits. Once again it is “*�? “1�? on your touchtone telephone to signal for questions. And we’ll take our first question today from Anthony Noto with Goldman Sachs. Q - Anthony Noto: Jeff, in the past, you and I’ve talked about – similar just I’ve asked you questions about the structural challenges outside the books, music and video that I thought were apparent. As we’re focused in the books, music and video business, just excluding then a business that is really advanced that is from competitive advantages and keeping a little cost operator being able to give consumers lower prices than being loyal to better selection. As you think about that business in the next 5 to 10 years, and the impact this may have on the profitability, do you worry about the profitability that business is eroding giving the digital margins are much lower than the physical margins? And then secondly, 2006 was like it’s going be the third year in which your incremental margins have trended below the prior year, which means you continue to invest. At what point does that investment end and we start to a rise in your incremental margins and a return in that investment? Thank you. A - Thomas J. Szkutak: Sure thanks Anthony, and by the way I think you had twins yesterday, congratulations on that. Q - Anthony Noto: Thank you. A - Thomas J. Szkutak: If you look at our digital investment, we’re excited about the opportunity there going forward. In this physical world, now that’s where the vast majority of media products are sold today in physical stores. And as we move forward with digital, we think Amazon is especially well-positioned to capture bigger part of that business, while media products are physical, it makes a lot of sense for a big fraction of them to be sold in physical stores, and I think that there will be a sustainable margins there after those players who can create a very good customer experience, and that’s what we are working on doing. And the second part of the question, I forgot. Q - Anthony Noto: It was just that 2006 looks like it will be the third year in which your incremental profitability is lower than the prior year, which implies you’re investing again for the future, and I just wondering at what point do we see that investment go off and a return in the investment hit the P&L which we would measure as an improvement in incremental margins? A - Thomas J. Szkutak: Well if you look at 2005, it was definitely a year where we increased our cost structure significantly. We did that deliberately and we did it because we see a lot of opportunity going forward. I do think that we will see over the next couple of years that we will be able to - we’ll start to see the utilization of that cost structure over the next couple of years. Q - Anthony Noto: Thank you. A - Thomas J. Szkutak: Thanks Anthony.

We’ll take our next question from Robert Peck, Bear Stearns. Q - Robert Peck: For following on Anthony’s question there, could you maybe quantify or shape for us with the investments you’re making, what portions are going to newer initiatives A9, Alexa, what portion is going for Amazon Prime, because Amazon Prime - could you maybe quantify how many current sub you have for Amazon Prime? A - Thomas J. Szkutak: In terms of the investments we’re making, we’re making a number of investments that are short-term, intermediate and longer term. And we haven’t quantified the pieces but certainly we should look at the investments we’re making in A9 as being longer term, our digital web services are certainly longer-term initiatives for us. But again, we’re making a number of different initiatives, Amazon Prime certainly is one that we’re investing in today, it is expensive, and that being said, the earlier results that we see we like, we’re seeing, the customers that are Amazon Prime members are shopping more, they’re doing more cross-shopping, we saw a nice increase in subscriptions and Q4 with subscriptions doubling from November-December so, we’re seeing some positive signs, its still very early but we see positive signs and we would like, so we would like what we see there. A - Jeffrey P. Bezos: And I would just add that Amazon Prime while very expensive, we see in at the same potential that we had with the three supersaver shipping. That was very expensive and yet it really improved the customer experience and we think to have a very good business results over the medium-term and that’s exactly what we would expect to have happen with Amazon Prime. Q - Robert Peck: And a quick follow-up, could you maybe give us your thoughts on competition from eBay Express, Google Base and Freemont, what that can mean to your future growth? A - Thomas J. Szkutak: Well we have a long standing practice of not talking about other companies but more generally, what I can tell you is that we believe and have believed for a long time that the internet is driving better and better consumer information. And as a result, we believe the companies that delivers sincerely better customer experiences, which includes competitive pricing, it includes reliable fast delivery, it includes having the right selection and the inventory and stock and available that those important customer experience and drivers will shine through in a world that has increasingly better consumer information. And I think many of the things that we see happening on the internet fit into that trend of better and better information, more empowerment for consumers, from where we sit because of the way we’ve operated the business, we like that trend.

We’ll take our next question from Heath Terry with Credit Suisse Asset Management. Q - Heath Terry: Great thanks. Can you talk to us a little bit about products, your international product strategy, and I know I’ve asked this question before but as you continue to see success in areas outside of the - or in areas that you don’t currently offer in other markets, what’s the thought process behind expanding your product portfolio internationally to mere the one that you’ve got in the US? A - Thomas J. Szkutak: Sure. We, in terms of additional selection, you should expect going forward that we are going to add additional influx in the categories that we’re in. You should expect that we’re going to launch new category certainly overtime in international as well. When we launch new categories, I was trying to learn how to give the best possible customer experience that we can, we’ve learned from that and then we expand to other geographies. And so that’s how we think about it, and traditionally, you know that has happened before starting with the US, but certainly, over the past few years, we’ve all, focused on that and all of the geographies we are in. Q - Heath Terry: So there is certain limitations in the international markets that have tapped you from entering categories there that have been successful here? A - Jeffrey P. Bezos: No I wouldn’t say there are structural limitations there, as we build out categories we need to build supply chains, vendor relationships and so on. So there is the deliberate effort that takes time as we go through in opening those categories, we used the data from whatever market we first open in, we use that data to help prioritize which category as we do next in other geographies. But our selection goals, well first of all in terms of category expansion, our long-term vision it has got all of the geographies to be the same. So any story you see in any - in any category you see in any geography you will see in all the geographies. So that’s a long-term vision. And then within each category, we also continue to add selection. So even in categories, even in US books, the category that we’ve been working on the longest, even in that category over this past year, we added significant selection. Q - Heath Terry: Thank you. A - Thomas J. Szkutak: Thank you.

From CIBC World Markets, Paul Keung. Q - Paul Keung: Hi, looking at free cash flow growth its been, you sell it some in the mid-teens and back at this year, and then based on your guidance, it looks like you are looking for free cash flow both next year and a mid point somewhere plus or minus 10%. So, based on this a question I guess very similar to that as Anthony, I mean as you claim your business out, and if you look at the range of guidance for next year, is it possible to manage a business group – may not go next year or do you actually manage actively the kind of, to the same growth comparable to your topline? A - Thomas J. Szkutak: Well certainly, we have a focus on trying to make sure that we grow free cash flow and free cash flow per share overtime, certainly, its certainly a key element that we look at and certainly most important measure. That being said we are going to make sure we do the right thing for long-term investors as well and as you look at 2006 specifically, we think that free cash flow will trend largely with operating income. And as you look at the guidance you can see that based on the Q1 guidance that we’ve given and the total year guidance that we’ve given, that we expect that the leverage would be slightly be better in the second half versus the first half. So again, as you look at free cash flow it’s, we think it will trend inline with how I described. Q - Paul Keung: Is that more specific to your OpEx, or is it the capital spending that’s causing them? A - Thomas J. Szkutak: Yes, if you look at the operating expense for 2005, and the buildup that we’ve had through the course of the year, you’ve seen that, very specifically, our total operating expenses are up 127 basis points, our technology and content is 115 basis points of that increase. And as Jeff described earlier, that’s because of the opportunities that we see. We are going to still increase technology and content next year, we are going to hire more software development engineers and computer scientists, but I would not expect that the increased technology and content in 2006 to be as great as 2005. So again, you have the base that we have that as you see as in Q4, and then the elements that I described, which would mean that, as you get closer to the back half of the year, will be lapping some of the big increases that you saw in 2005. Q - Paul Keung: Got it, I see and a real quick one. I’ve seen some interesting things you’ve done in Alexa, IMDb and on the Search, I was curious, is there any monetization of those assets in your ‘06 forecast? A - Thomas J. Szkutak: Sure, yeah, the, certainly the IMDb will certainly be monetized, that today, it’s an interesting business for us and, certainly to cooperate into the guidance for 2006. Q - Paul Keung: Yeah, thanks.

Next we’ll hear from Jeetil Patel with Deutsche Bank. Q - Jeetil Patel: Hi guys two questions, first of all can you talk about just overall market wise, that UK ecommerce market is there any interesting new onsets challenges, changes in the market dynamic there from economy standpoints, maybe a slowdown, as you went throughout the quarter? Second, can you talk about, I guess the third party business in Europe and is that, are you getting enough selection in broadly in the international markets to drive relevant and drive transactions, or do you think there is still opportunity to build out selection to a third party platform there? A - Thomas J. Szkutak: In terms of the, we’ve launched and in the practice of not talking about individual countries but if you look at certainly your international growth, we saw, we had very solid performance in our international segment in Q4. We grew revenue 13% on a dollar basis but 23% on a local currency basis, which was consistent with what we saw in Q1, a little bit below what we saw in Q3, - Q2 and Q3 with Q3 had Harry Potter fixed in it, where our operating performance in total was very strong with gross margins being at the highest level its been in sometime, gross profit being up 44%, and CSOI growing 89%, so strong overall operating performance in international. And then in terms of the third party it continues to be a big part of our overall mix globally in both segments. As I’ve mentioned in the opening comments the third party mix is 28% of our total units globally, that’s up from 26% in 2000, Q4 2004 and we still see a lot of opportunities to add selection as the seller as well as third party selection. A - Jeffrey P. Bezos: Operator, next question?

Next we’ll hear from Safa Rashtchy, Piper Jaffray. Q - Safa Rashtchy: Good afternoon, could you talk about the investments that you are making in the digital area, what is needed to get that operation going assuming in the next few years you will have a sizable part of your media available in digital format, in addition to obviously securing those titles from the content providers, and having some basic technology which I assume is already available? What else do you need to do to get there, and can you give us some color on these investments you’re making? Thanks. A - Jeffrey P. Bezos: It’s a good question that’s premature for me to talk in any detail about those initiatives, we will, you just have to stay tuned on what we are doing there. Q - Safa Rashtchy: Okay, then if I could do a follow-up on a different topic, and Tom could you talk about your expectations on return on equity, do you expect it to continue to increase or given the investment mode that you are in, and a decrease in operating income on ’06, what should we expect on ROE? A - Thomas Szkutak: Sure, we hadn’t, we are not giving guidance on ROE specifically, but certainly, our return on invested capital if you will was 32% for the year, and again, we still think it’s something that we utilize capital very efficiently, and we think that there is a lot of opportunity overtime to improve that. Q - Safa Rashtchy: Thank you.

Next question comes from Jim Friedland, SG Cowen. Q - Jim Friedland: Thanks. Can you give an update on a regulatory front, if there is any visibility when you might need to collect sales tax beyond the states where you have physical operations? A - Thomas J. Szkutak: No this is not a lifetime new there, we collect sales tax in a few states today, and we continue to work, try to help legislators come up with something that’s simple. Q - Jim Friedland: And in the states where you do collect sales taxes is there any kind of meaningful difference in the dynamic between the way your customers purchase versus others states like maybe not buying as many big ticket items, things like that? A - Thomas J. Szkutak: No, in fact it’s not just the individual states that you sell to, you need to be aware that we collect value-added tax and the countries that require it, and have been doing so for since inception, so again we have a lot of other data points, on the states that we collecting. Q - Jim Friedland: Okay great thanks.

Moving on to Imran Khan with JP Morgan. Q - Imran Khan: Yes, hi Jeff and Tom, in terms of, you are investing lot of money in increasing customers’ experience, if I look at that revenue growth rate, your US and International business growing at the same rate. So two questions, in terms of international, what can you do to accelerate the growth rate because I am assuming the market set is probably bigger than US. And secondly, if you look at the US numbers, I know you don’t report gross margin that’s volume but how do you think about the market share because if I look at the ecommerce market that’s probably growing like 24-25%, you are reporting 21% revenue growth. So do you think you are losing market share, or the growth is coming from other categories and if so if you see an opportunity to expand into those categories? Thank you. A - Thomas J. Szkutak: Sure, I’ll take the North America piece first, I think we’ve made, good progress we’ve looked at our share on a product category – by product category basis. We think we are doing pretty well there, if you look at the results that we’ve had, our North America revenue grew 22% in 2005. That’s actually an acceleration up from 400 basis points, up 400 basis points from 2004. If you just look at the history, 2005 with 22% growth, 2004 was 18%, 2003 18%, 2002 12%, and 2001 3%. So again, you see some nice progress of the past five years in terms of growth and so, the challenge going forward is how can we continue to accelerate that growth. In terms of international, we still think there is a lot of opportunity as you mentioned, we are going to as I mentioned earlier, its going to continue to expand selection in the categories we are in. We are going to expand into new categories overtime, certainly overtime we should expect that’s also launched new countries, certainly we are going to invest more in pricing as well and continue to focus our resources on improving the customer experience. So those are things that we think we can do to improve our growth there, and will certainly get a lot of our attention. Q - Imran Khan: Okay thanks.

Next question is from Mark Rowen with Prudential. Q - Mark Rowen: If I could, two questions actually, the first if I could just follow-up on Imran’s question. So when you look at the international growth in media products and also consumer electronics, they tend to be trending about the same now as North America. And would you say that, as you go country-by-country, in Germany and the UK and Japan and France? Are you at similar levels of penetration in those product categories as you are in the US and North America? And is that why the growth is sort of trending at the same level or is that something specific going on internationally that’s causing the growth to decelerate towards that trend line and then I have another question if I could? A - Thomas J. Szkutak: Sure, I think if you look at the categories that we are in outside of the US, we are actually in each of the countries in less categories outside of the US than inside of the US, so its certainly an opportunity for us to grow, and again I think if you look at the deceleration that you just described, in Q4 specifically, again if you look at our total performance, you see that the performance is certainly the revenues is growing 23% excluding exchange which is, higher than our North America growth, but on top of that our gross profit is up 44%, our gross margins are up 273 basis points. Our CSOI excluding exchange is up 89%. So again, we have a strong overall performance, what we need to make sure going forward is that we, we have good balance between growth and profitability and driving free cash flow off our international. So that’s what we are thinking about it. Did you said you had another follow-up question? Q - Mark Rowen: Yeah just on that one also, so would you say that you are at similar levels of market share and say the media products categories in places like the UK and Germany as you are in the US? A - Thomas J. Szkutak: Yeah we haven’t disclosed our market segment share, results by country or anything, but I would certainly say there is, certainly very sizeable opportunities both inside the US and outside of the US and, even outside of the categories that we in, again we are in, we are just in less categories today outside the US than in the US, and so there is certainly a lot of opportunity and so globally. Q - Mark Rowen: Okay my other question is for Jeff, Jeff you’ve said for a long time that your model more efficient than the traditional retail model, because you don’t have to invest in real estate virtual, which always goes up and instead you tend to invest in technology, which goes down. But if I add up all of your expenses as a percent of revenue and adding free shipping which is sort of view as a marketing expense, I think in 2005, it was a little over 20% and in the fourth quarter little over 19% which is 200 or 300 basis points higher than a company like Wal-Mart, so could you sort of just give us an idea why that such a paradox, why is that we are not seeing more efficiency if in fact the model is more efficient? A - Jeffrey P. Bezos: Well, I think one thing to keep in mind is that if we were not investing in some of these new initiatives, such as digital and web services, our cost structure would be different toady. So if we were totally optimizing our cost structure for a kind of steady state business you’d see a different cost structure. Other things that we talk about that you may remember are if you look at the return on investing capital, the dynamics between our business and traditional retail are very different in large part because of the efficiency of our capital model, high inventory turns, low PP&E. Q - Mark Rowen: Okay thanks. A - Thomas J. Szkutak: Sure.

We will be taking our final question from Justin Post of Merrill Lynch. Q - Justin Post: Yeah, couple of things about gross profit which actually surprise me upside versus our forecast, it looks like gross profit in Europe was really strong, was there a product mix. I think you mentioned some vendor improvement, is that sustainable? And then on the other revenue growth, has the credit card growth kind of flattened down a little bit here and can you give us any outlook an what do you think for other revenues going forward? A - Thomas J. Szkutak: Sure in international, we did see a very positive vendor management, we did see a positive from third parties, we also saw from, you mention mix actually the product mix, we had EGM which is a lower margin, actually grew at faster rate, so that actually was, hurt gross margin if you will. But then also, partially offsetting the expansion that we saw was certainly lower prices to our customers. So that’s kind of the picture on the international side. On the other in North America, yeah, we saw a very good growth in our merchant.com business if you will, out third party business growth and, we have two big pieces that roll through after North America, the other pieces are co-branded credit card, we did have a very large 2004 Q4, as we had mentioned before and we are lapping that so that was essentially flat, so the third party business so that’s our merchant.com business was very strong. Q - Justin Post: Great and just a follow-up, is the improvement in Europe the same or whether there was some one-time buys that really helped you out in the fourth quarter? A - Thomas J. Szkutak: Yeah, as I talk about it earlier, the challenge was you described as Europe, it’s actually international which includes our Asia business as well. But, the challenge with our international segment is to make sure that we have a good balance between unit growth and profitability. And so which you saw is, certainly growth in international it was stronger excluding exchange that we saw in North America. But again, we had expansions in gross margins and operating margins there. So the challenge going forward is we need to make sure that that is balanced and that we get both, strong growth and profitability of free cash flow there. Q - Justin Post: Thank you. Thomas J. Szkutak, Chief Financial Officer: Thanks Justin. Thank you for joining us in the call today and for your questions. A replay will be available on our Investor Relations website at least till the end of quarter. We appreciate your interest in Amazon.com and look forward to talk to you again in next quarter. Jeffrey P. Bezos, Chairman, Chief Executive Officer: Thank you.

And that does concludes today’s Amazon.com fourth quarter 2005 financial results conference. We thank you all for joining us.

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