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Last Updated: Tuesday, 25 July 2006, 22:34 GMT 23:34 UK
Amazon profits slump 58% on costs
Screen grab taken from the Amazon website
Amazon is facing tough competition from other retailers
Online shopping giant Amazon.com has seen quarterly profits tumble, following spending on new technology and investment in its toy business.

Net income fell 58% to $22m (12m) in the three months to 30 June, from $52m a year earlier. Sales were up 22% in the quarter to $2.14bn.

Amazon has increased spending, as it strives to stay ahead of rivals by offering deals such as free postage.

It also has expanded its toy section after ending a tie-up with Toys R Us.

Amazon's shares fell in after-hours electronic trading in New York, indicating that they will start $3.37 lower when markets open on Wednesday.

Analysts questioned the company's strategy of focusing on its discount shipping programme, Amazon Prime, at a time when it was facing intense competition and having to increase spending on technology.

Martin Pyykkonen, an analyst at Global Crown Capital, said that Amazon did not seem to be stimulating sales growth in the way many had hoped.

"Although Amazon Prime may be having some shipping impact, it's not a windfall for the company," Mr Pyykkonen said.

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