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Tech Industry beats 3Q estimates but sees lower margins ahead Inc. (Nasdaq: AMZN) checked in with a smaller-than-expected loss in its third quarter Wednesday, losing $86 million, or 26 cents a share, on sales of $356 million. However, rising expenses will crimp profit margins in future quarters.

    Ahead of the earnings report, shares closed off 5 5/16 to 75 15/16.

    First Call consensus expected the online retailer and auction site to lose 28 cents a share in the quarter.

    The $356 million in sales represents a 132 percent improvement compared to the year-ago quarter when it lost $24 million, or 8 cents a share, on sales of $154 million.

    Henry Blodget, an Internet analyst at Merrill Lynch, predicted would record total sales of $345 million in the quarter and add another 2.1 million new customer accounts.

    In the quarter, added 2.4 million new accounts, bringing its total to 13.1 million accounts, up 190 percent from the 4.5 million accounts it held in the year-ago quarter.

    Repeat customer orders accounted for more than 72 percent of total orders in the quarter, up from 70 percent in the second quarter.

    "In the third quarter, we announced our new Toys Store, which was immediately recognized by both Forrester Research and MSNBC as the best toy store on the Internet," said CEO Jeff Bezos in a prepared release. "Toys and our other product expansions round out our rich selection and establish as the one-stop holiday shopping destination."

    But that expansion will come at a price.

    During a conference call with analysts, Bezos said's fourth-quarter gross profit margins would fall between 200 to 300 basis points compared to the third quarter due to increased investment in new services, marketing expenditures and extra personnel to handle the frenetic holiday shopping season.

    Bezos said the company will triple its marketing budget from the previous quarter and that operating expenses compared to total sales will remain the same or slightly higher than the third quarter.

    Company officials said its U.S. books divsion is on track to be profitable in the fourth quarter and will represent "less than half" of the company's total revenue in the quarter. Going forward, expects it will report some of its new product lines separately, which indicates those new offerings must be gaining momentum.

    Last quarter, met analysts' estimates, losing $82.8 million, or 51 cents a share, on sales of $314.4 million.

    In the quarter, operating expenses surged to $261 million, up from $76.3 million in the year-ago quarter. shares hit a 52-week high of 110 5/8 in April after trading at a low of 19 last October.

    Twenty-one of the 25 analysts following the stock maintain either a "buy" or "strong buy" recommendation.

    First Call consensus expects it to lose 27 cents a share in its fourth quarter and 94 cents a share in the fiscal year.