Shares in Amazon plunge 6%

AMAZON, the world's biggest online retailer, has bounced back into a profit as free postage incentives drove sales up 26%.

However, its results still fell short of expectations in New York and the stock fell 6% to $43.12.

After last night's close on Wall Street, Amazon.com said it earned $76m in its second financial compared with a loss of $43m for the same period a year ago. The Seattle-based company's 18c a share earnings compared to 10c last year, but was below expectations of 19c.

Jeff Bezos, chief executive, also surprised analysts with a pledge to retain its free postage policy on larger orders.

'Whilst free shipping is expensive for the company it saves our customers tens of millions of dollars each quarter and we plan to keep it in place indefinitely,' Mr Bezos said.

UK customers get delivery on orders over £25 compared to $25 (£14.25) in the US.

Sales surged to $1.39bn from $1.1bn. But analysts had hoped for $1.4bn.

The company expects total sales of $1.425bn-$1.525bn in the third quarter and $6.625bn-$6.925bn for 2004, in line with analysts' forecasts of $6.8bn.

Amazon's largest division, which consists of books, music and videos/DVDs, saw revenue grow 9% percent, substantially lower than 16% growth in the first quarter.

Executives said the slowdown was due to an unfair comparison with a boost from Harry Potter products earlier this year.

International sales grew 50% in the quarter, a rate far faster than North American sales. Its foreign markets now account for 43% of sales.

The results cap a bleak week for US technology stocks. On Wednesday, online auctioneer eBay, said profits had more than doubled to $190.4m in its second quarter. But the results were worse than expected and the shares tumbled 10% to $76.60.

Meanwhile, shares in Microsoft fell 5% after-hours trade last night last night. The slide came despite the software giant posting a 15% in the quarter to the end of June.

But the company also delivered a more modest outlook for the coming year and said it's adding significantly fewer employees than it had previously announced.

The slower job growth could even spur Washington State, home to the company‘s Seattle base, to revise its economic forecast for the region.