Jan. 27 (Bloomberg) -- Amazon.com Inc. Chief Executive Jeffrey Bezos produced the best quarter since he founded the company in 1994 by letting merchants such as Starbucks Corp. and Fred Meyer Jewelers hawk goods through its Web site.

Amazon.com, the world's biggest Internet retailer, will likely report later today that fourth-quarter net income climbed to $101.5 million, or 24 cents a share, according to three analysts surveyed by Bloomberg News. The Seattle-based company earned $2.65 million, or 1 cent, in the year-earlier period.

Products sold by other vendors were the fastest-growing part of Amazon.com's business before the holiday season, and probably rose 69 percent in the quarter, according to Deutsche Bank Securities. Bezos, who began Amazon.com as an online bookstore, may have produced the company's first full-year profit by giving at least 850 retailers access to its more than 35 million customers.

``That's tremendous growth,'' said Paul Cook, who helps oversee $35 billion of assets at Birmingham, Michigan-based Munder Capital Management, including about 451,000 Amazon.com shares. ``Clearly it's something they've pulled off.''

A profit would also mark the first time the online merchant has had consecutive quarters of net income since it first sold shares in 1997. The company had an accumulated loss of $3.05 billion at the end of the third quarter.

Analysts expect profit, excluding stock-based pay and some costs, to be 29 cents a share in the fourth quarter, according to Thomson Financial survey. Profit on this basis isn't in keeping with generally accepted accounting principles.

Shares of Amazon.com fell 8 cents to $57.03 yesterday in Nasdaq Market composite trading. The stock more than doubled in value last year, making the shares the sixth-biggest gainer in the Nasdaq 100 index and swelling the company's market value to almost $23 billion.

`Unparalleled Power'

Amazon.com opened so-called shops featuring products from sporting goods, gourmet foods, jewelry and health and personal care retailers during the last four months. The site now features retailers ranging from regional businesses including Hawaiian shirt-maker Hilo Hattie to Target Corp., the No. 2 U.S. discounter and Gap Inc., the largest U.S. clothing chain.

``The power of Amazon in terms of an e-commerce place is really unparalleled,'' Starbucks Chairman Howard D. Schultz said in an interview. The company offers Starbucks coffee, teas and mugs on the Amazon.com site. ``We are benefiting from that association in ways that we couldn't on our own.''

Bezos, 40, is its largest stockholder with more than 25 percent of its shares. He sold 3.6 million shares worth $128.8 million last year, according to regulatory filings. He received $82,000 in salary in 2002.

Busy Holidays

Amazon.com last month said the holiday season was its busiest ever, with a single-day record of 2.1 million products being ordered.

``The quarter was driven in large part, as it has been in the past, by some of the new things we've done, in this case, new selection,'' Bezos said in an interview earlier this month at a Las Vegas trade show. He declined to comment further on the strategy of adding retailers to its sites.

After expanding from books to music and toys, Amazon.com began allowing small retailers to sell on its site in 1999. In 2000, the company agreed to operate a Web store for Toys ``R'' Us Inc., the No. 1 U.S. toy chain. In 2002 it opened the first of shops on its main Web page with items from other retailers, a clothing and shoe store featuring products from Gap and Sears, Roebuck & Co.'s Lands' End unit.

Last year Bezos created a division, Amazon Services Inc., to handle the additional retailers. Amazon.com spokesman Patty Smith declined to provide specifics on how it charges the other merchants.

Sales may have climbed 31 percent to $1.87 billion in the quarter, according to analysts surveyed by Thomson Financial. Per- share profit is forecast to be 16 cents a share for the first quarter and 88 cents for the year, the average analysts' estimates.

More Choices

The program fits with Bezos's strategy of offering as much selection as possible, said Deutsche Bank analyst Jeetil Patel. It also helps generate more revenue from the company's $1.1 billion investment in proprietary software programs and computer systems.

``It's a good starting point for where Amazon.com is heading,'' said Patel, who has a ``buy'' rating on the shares and doesn't personally own the stock.

Amazon.com is able to generate gross profit margins of at least 75 percent on the commissions it charges retailers, according to an estimate by Paul Keung, an analyst at CIBC World Markets. He said Amazon probably gets 10 percent to 15 percent of the revenue from merchandise sold by other retailers. Keung expects Amazon.com to report net income of $93.3 million, or 22 cents a share.

Reputation at Stake

Managing merchant relationships presents risks such as hurting Amazon.com's reputation for customer service, said Forrester Inc. analyst Kate Delhagen. Amazon.com last month said it shipped more than 99 percent of its holiday orders on time.

During December, Amazon.com had 45.7 million site visitors, with only Web auctioneer EBay Inc. attracting more, according to ComScore Networks Inc.

``From a retailer perspective they can bring this massive customer base to the table,'' said Eric Best, chief executive of Morse Best Innovation, a closely held Seattle firm that helps retailers integrate their businesses with Amazon.com.

``It's a phenomenal way to build awareness of a brand,'' said Matt Corey, a vice president for the Bombay Co., a home furnishings retailer that began selling through Amazon.com three months ago. ``You drive some pretty good online sales as well.''

Last Updated: January 27, 2004 00:00 EST