Moody's upgrades Amazon.com

Moody's Investors Service said it upgraded Amazon.com, Inc.'s corporate family and probability-of-default ratings to Ba1 from Ba2, its senior subordinated notes to Ba2 (LGD5, 88%) from Ba3 (LGD5, 82%) and its speculative-grade liquidity rating to SGL-1 from SGL-2.

This concludes the review for possible upgrade begun on Nov. 19, and the outlook is positive.

The upgrade reflects the company's very strong fiscal year 2007 sales growth - which resulted in a notable improvement in profitability, free cash flow and further strengthening in the company's credit metrics - and Amazon.com's ability to generate solid sales growth during the holiday season despite an overall weak retail environment, the agency said. The upgrade to SGL-1 reflects the sizable increase in the company's cash balances.

Moody's said Amazon.com's Ba1 corporate family rating reflects the company's solid credit metrics, well-recognized brand name, international diversification, dominant position in online retailing and strong supply chain and fulfillment capabilities.

The rating is constrained by the company's relatively short history of profitability; by its rapid growth rate, which can potentially strain its internal resources, business procedures and controls; by high seasonality; by the product volatility associated with media products; and by unclear financial policies, the agency said.

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