Bezos: Amazon to diversify further

STOCKHOLM, Oct 9 (Reuters) - The chief executive of the world's biggest Internet retailer Amazon.com rejected on Monday criticism of the group's expansion strategy amid a sagging share price, saying it would diversify further.

Jeff Bezos also told Reuters in an interview that he expected the upcoming and important Christmas season to be a strong one for Amazon and companies like his.

Amazon, seen as a bellwether for the online retail sector, has come under pressure to show profits, as many smaller Internet retailers have had to close their virtual doors after showing a greater ability to spend than to make money.

But having started with an online bookstore, Amazon has a strategy to continue expanding and diversifying to enable customers to buy anything on the Web. Last week it announced it would launch a full-service camera and photography store in a deal with online photo service Ofoto Inc.

"We will continue to do deals like the photo deal and we'll also continue to enter new product categories," Bezos said.

But last week an influential analyst at brokerage Robertson Stephens said the growing list of offerings could prevent Amazon from ever escaping from the red.

"That belief is incorrect," said Bezos when asked if the Seattle-based company's business model was flawed and it was diversifying too much into new product areas.

"The model works... selection is an advantage not a disadvantage," he said about the company he founded.

"Oh, I know we will be (profitable)," Bezos said with one of his regular outbursts of laughter in a very early morning interview, but declined to reveal the company's internal and secret goal of when it will reach profitability.

Critics say that in moving from its original book, music and video business into everything from toys to photo processing Amazon risked making itself inefficient and unprofitable.

But Bezos said Amazon would continue diversifying in terms of product categories both through partnerships, such as the Toys R Us Inc. deal, and on its own.

"Our goal long-term is to build a place where people can go to find and discover anything they might want to buy online and that's a multi-decade goal," he said.

The company would not achieve this alone.

"It's too ambitious a goal to achieve alone. We are going to do it in a combination of what will ultimately be thousands and thousands of partners," he said.

Bezos also said Amazon would continue focusing more on Europe and launch local language Web sites following the recent launch of its French site www.amazon.fr.

"Long-term we would like to have a local presence in every country but that's going to take a long time," he said, adding it would take several decades.

Amazon, with a market capitalisation of $11.23 billion, incurred a 40 percent rise in losses to $115 million in the second quarter while revenues rose 84 percent to $578 million.

But Bezos said he expected a great Christmas for the e-commerce sector in general and Amazon in particular.

"I think it's going to be a Web Christmas," he said.

"This will be our sixth Christmas so we get better each year and that's a big advantage for us... every Christmas that has gone by has been bigger and more important then the last and I see no reason why that should change," he said.

Bezos expects digital cameras, digital video disc players and light-weight fold-up scooters to be big hits this Christmas.

Europe better market than U.S.

While many analysts and industry experts question the health of the online retailing sector in both the United States and Europe, Bezos said he was convinced Europe was the best market.

"The rate of growth for Amazon in Europe is dramatic, much more dramatic than it has been historically in the U.S... people here believe e-commerce is not taking off but that's not the maths that I see," he said.

Bezos said he expected Europe in the long-run to be a more important e-commerce market for Amazon - which has 23 million customers - and other such companies than the United States because it was a bigger market.

He said European buying over the Internet would benefit from high-population density and lower shipping and transport costs.

While investors still seem split on the company's prospects, its stock has made a steady slide from its 52-week high of $113 in December 1999. On Friday it closed 2.7 percent higher at $36.

"Since it's a volatile stock and since we've always asked investors to focus on the long-term, we're very proud of our share price... I think that the volatility is appropriate for a new industry like this," Bezos said.