Amazon.com second quarter earnings did not make investors happy, with net income down sharply from 2005 thanks the severed relationship between the internet retailer and Toysrus.com to $22 million, or 5 cents a share. Investors had driven the stock down below its 52-week low by the time the hold music had come to an end and the conference call had begun. Here's a link to the company's report.

5:04 p.m. After the usual disclaimers, CFO Tom Szkutak ("Tom") takes over to do a dry recap of the results. He sounds very, very, very softspoken. Even, a little ... afraid? Maybe he's just a master of zen.

5:08 p.m. I have to turn my volume up to hear him. "We continue to invest in increased selection." The SKUs in warehouses have increased by 48%, and Tom points out the new grocery selection, as well as the addition of German sporting goods.

5:09 p.m. Revenue grew 23% excluding the impact of Toysrus.com in North America. Gross profit grew 11%, although the gross margin decreased. I think he said 174 basis points of 220 total bps decline -- a huge part of it, but the decrease would have been there regardless. That's interesting and I hope management explains the reason for those missing 50-some basis points in operating margin shortfall.

5:10 p.m. He says that international operating income and margins decreased due to low prices, including free shipping, and a change in mix.

5:14 p.m. Talking about costs and growth, we hear the company will "continue to focus on availability and selection," which I think means they're planning to buy lots more inventory. Tom says this twice.

5:15 p.m. Membership in Amazon Prime (which allows customers to receive greatly discounted overnight shipping and other perks) doubled in Q2. The company expects more growth.

5:16 p.m. For the first time, toy and baby products are eligible for free supersaver shipping for Amazon Prime. I'm almost wanting to be an Amazon Prime member now...

5:17 p.m. Third-party sellers remain a large part of the company's inventory and sales strategy.

5:18 p.m. He's giving guidance now. There's a large amount of uncertainty about the fluctuation of foreign currency and the unpredictability of demand. Sales could be up to $10.65 billion for 2006, a growth, although operating income is expected to decline quite sharply.

5:22 p.m. To sum up, the company plans to continue to improve free cash flow and operating cash flow. Bleh. I'm so *not* excited by Tom. Does an investor want to be excited by a company's CFO? I don't know, but maybe just a teensy bit more flash could help.

5:23 p.m. Question time. We now get to hear from Jeffrey Bezos! Yay. He's great at not answering questions and is a little more peppy than his CFO. He firstly answers a question about the change in bottom line from expectations, which is, yes, mostly because of the investment in toys and baby.

He also says that the company is very excited by the adoption of web services, which allows developers to offer Amazon.com products on their own web sites in creative and open-source-y ways.

5:26 p.m. Anthony Noto from Goldman Sachs (always one of the first few to ask questions: everyone must love him!) wants to know about the strategy going forward, and what are you all talking about with this free cash flow thing? Aren't your lower prices actually decreasing free cash flow? And Bezos, oh my goodness, what the heck is he talking about? He talks about "building fly wheels for growth." Umm, thank you for your clarity Mr. B. Selection and cost seem to be two of the flywheels.

See, if you improve availability, and decrease costs, you can spin your flywheels, decrease costs even further, support a multi-node network, and offer Amazon Prime, where you can offer free supersaver shipping economically. But you have to have volume in order to have economy, and you have to lower prices to have volume... it makes sense, and it doesn't, all at once. I'm mesmerized by his lexicon.

5:30 p.m. Really, really, why are costs so high? Is it because of some things you haven't told us about yet? Nope, says Jeffrey.

5:32 p.m. Prudential Securities asks: How much will you invest in toys? With the lower operating margin, is that a function of gross margin, or higher expenses? Investment in people to run the category, investment in the selection, and an investment in the fact that they'll offer free shipping and free super-saver shipping in Amazon Prime, as well as very competitive pricing.

Will you be able to sell as many toy units as Toysrus did? Did the brand attract customers or is it just y'all? Jeffrey says he's optimistic, but not giving unit guidance -- in the long term, it's very good. I'll tell you my opinion as a consumer of toys and baby items: I hate the Toysrus.com brand, as well as the business strategy of the retailer, so I much prefer Amazon.com's take on it. Plus the whole supersaver shipping thing. I'll buy more units.

5:37 p.m. Justin Post from Merrill Lynch. Shipping costs were up from $188 million, up 27% from $148 million, and shipping loss increased to 2.8% of net sales from 2.6%. What do the Amazon Prime customers give you that normal customers don't? Are you sticking with this strategy? Jeffrey says they're more positive about Amazon Prime than they ever have been -- because there is a lift in sales. The experience is improved, because they're getting their products more quickly -- instant gratification. The big reason Amazon.com likes it: there is an increase in sales, it deepends the company's relationship with them, and it encourages them to shop in more categories. It's an expensive investment but no one else could do it. Bezos seems to be really harping on the "we're the only one who can do this so well" theme. Interesting... is he worried about something? Was there a particular analyst report wondering about that? Huh...

5:42 p.m. Piper Jaffray wants to know if the company will get incremental leverage in a slowing economy? Bezos says that growth and scale give the company leverage, not so much the economy ... either way. Will gas prices affect demand? He says, no, the company is not a bellwether for the economy given its high growth rate.

And why the grocery category? It's so low-margin. They say they're used to operating with this sort of thing... the "stock up items" and the wide variety that Amazon.com is really good at delivering. They're being selective about which things they offer. "Instead of a few flavors of Jell-O, we're offering all 80," says Jeff. YUM. I'm going to check out their Kool-Aid selection now! [Later: yum! Pina-Pineapple? Mandarina-Tangerine? Soarin' Strawberry Lemonade? Jamaica Flavor? I want to try these all, despite the fact that I can only purchase them in 72 packs]

5:46 p.m. With eBay's fee increase, are you getting any increased interest in third-party? How about eBay Express, is that affecting you? How about Google Checkout? Jeffrey says he won't talk about other companies. These are very large markets, he says, there is room for 1000s of winners. He'll stay focused on customers. I.e. I'm not answering you, sucka.

5:47 p.m. Last question: how should we continue to think about international product offerings? Amazon.com thinks there is still a lot of opportunity to grow international product categories, there are a lot of both product and geographical expansion to go.

Wow. 45 minutes from start to finish ... the shortest earnings call I've live blogged. Plus the questions seemed to focus on the same thing, over and over. What about Toysrus. I'll be interested to check out the after-hours action now ... the stock is down a tick more, to $29.83. I'm looking forward to seeing what the analysts think.