Update: Amazon Partners With Greenlight to Sell Cars

Updated from 5:15 p.m. EDT

Seemingly unfazed by the recent demise of one of its online partners, Amazon.com(AMZN Quote) said Wednesday that it is pushing ahead a partnership with another Web player, Greenlight.com, selling cars to consumers.

The service, scheduled to begin Thursday, will be available in 27 markets around the country, including Atlanta, Chicago, New York City and Los Angeles. Amazon.com, blazing beyond book-selling into toys, tools, music and other items, will give Web users access to service and support from a number of auto dealers associated with Greenlight.com.

Greenlight.com will pay the Seattle-based retailer $15.25 million over two years as part of the deal, said Bill Curry, an Amazon.com spokesman. Greenlight.com, founded last year, is backed by Kleiner Perkins Caufield & Byers, a Silicon Valley venture capital fund.

Greenlight.com allows its consumers -- and now Amazon.com's estimated 23 million online shoppers -- to browse its online showroom, get access to offline dealers and take advantage of trade-in and financing options.

The announcement contributed to a rise in Amazon.com shares on Wednesday, sending the stock up 2 5/16, or 6%, to close at 38 13/16.

More importantly, the deal enabled Amazon.com to bounce back from the collapse of another partner, Austin, Tex.-based Living.com. Unable to raise enough capital, the online furniture store said last week that it was filing for bankruptcy, laying off 275 employees and shutting down its Web site.

Living.com had intended to pay the Internet retailer $145 million over five years under a deal worked out earlier this year. Amazon.com also had an 18% stake in Living.com, but analysts and company officials alike said the failed investment was unlikely to dampen Amazon.com's prospects. The company, moreover, said it already had accounted for the loss.

The new service with Greenlight.com is hardly a surprise. At the beginning of the year, Amazon.com said it would acquire 5% of privately-held Greenlight.com, which at the time agreed to hand over $82.5 million over five years to get a spot on the Amazon.com site. That deal allowed Amazon.com to increase its stake of Greenlight.com to as much as 30%.

Yet since that announcement, the companies had changed their minds, shortening the pact from five years to two years as uncertainty swept through the Internet sector, Amazon.com's Curry said. In early January, amid high expectations, the company's stock sat around 90, roughly 55% higher than today's share price.

"We're in a different environment today because of the capital markets than we were in January," Curry acknowledged, "and good partners recognize that."

The decision illustrates how quickly the climate has changed, and comes at a time when Wall Street observers are questioning whether some Internet companies are fit enough to survive, said Heath Terry, an analyst with Credit Suisse First Boston. The firm has not done any underwriting for Amazon.com.

Despite the turbulence, Amazon.com also said recently that it had struck a 10-year deal with Toysrus.com, a unit of Toys R Us(TOY Quote) to create a co-branded online toy and video games store as well as an online baby products site.

Amazon.com also has partnerships with online pharmacy drugstore.com and pet-supply store Pets.com, among other Internet companies.

Terry of Credit Suisse First Boston said the Greenlight.com deal is a good bet. "For Amazon.com, it's a great way to collect revenue, and at the same time, they can stick their toes in the water in what could be a huge space in the future."