"The numbers are dramatically better," Patrick Byrne said in an interview as the company posted results Tuesday that surpassed Wall Street expectations. "The business has really come together in a way people will find remarkable."

Despite lower revenue, Overstock posted its first positive cash flow in two years, said Byrne, who credited cost-cutting moves and warehouse efficiencies for raising gross profit margins on merchandise.

He said the company could break even during the next quarter. Wall Street responded by sending shares up more than 6 percent.

For the quarter ending June 30, Overstock reported a loss of $13.8 million, or 58 cents per share, compared with a loss of $15.8 million, or 78 cents per share, in the year-ago period.

"We were gushing $25 to $50 million a quarter" in years past, Byrne said. "It has bounced back."

Sales declined to $149 million from $159.2 million during the second quarter of 2006.

Analysts polled by Thomson Financial expected a loss of 65 cents per share on sales of $145.2 million for the period.

Overstock said direct revenue, which comes from sales to customers and businesses filled by its warehouses, declined $25.2 million year over year to $43.6 million.

At the same time, its partner revenue, which comes from items from other retailers and manufacturers sold on its Web site, grew by about $15 million to $105.4 million.

Along with lower revenue during the quarter, Overstock's cost of goods sold declined, coming in at $122.7 million, compared with $136.9 million in the second quarter of last year. That helped the company increase its gross profit and narrow its quarterly loss.

The company logged a $6.2 million restructuring charge during the quarter as well, which helped push operating expenses up to $39.8 million, compared with $37.9 million in the year-ago period.

Byrne said Overstock took the restructuring charge for surrendering two floors of its leased Salt Lake City headquarters and closing a Minneapolis warehouse, which leaves two warehouses in Salt Lake City. The company also consolidated three data centers into two.

Byrne said Overstock has trimmed its corporate staff and will allow customer-service representatives to work from home.

He said he was squeezing more expenses out of Overstock's operation and anticipates turning a profit even though he doesn't expect "a lot of top growth" in revenue.

Separately, Byrne continues to speak out against "naked" short sellers, whom he claims are trying to drive down Overstock's share price. A California court cleared the way July 18 for Overstock to move ahead with a $3.48 billion lawsuit against several brokerage firms.

Byrne says the decision will let Overstock ferret out evidence it needs to show the brokerage houses helped others manipulate shares.

"We know they're dirty, they know they're dirty - and they know we know they're dirty," Byrne declared.

Overstock shares rose $1.12, or 6.36 percent, to $18.73 in midday trading Wednesday. Shares were trading as high as $77 in 2004.