Amazon profits crash

27-07-2006

Profits at internet retail group Amazon dropped by 55 per cent during the second quarter of 2006, the company has revealed.

Although net sales grew by 22 per cent to $2.14 billion, overall operating income fell from $104 million in the second quarter of 2005 to just $47 million in the same period this year, amounting to a disastrous three months for the company.

Amazon insisted that the profit loss had been caused by "technology and content investments", reduced shipping costs and the development of Amazon Prime, a membership scheme designed to develop a firm customer base.

"We're looking forward to the coming decrease in our year-over-year growth rates in technology spending in the second half of 2006," said Jeff Bezos, Amazon.com's chief executive and founder.

"Amazon Prime gets customers their products fast, and our investments in technology position us to innovate in seller platforms, web services, and digital," he explained.

Investors failed to respond to Amazon.com's reasons for its sharp fall in profits. Shares in the company dropped dramatically following the results announcement, falling by 2.1 per cent in early morning trading.


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