Amazon's margins are coming under pressure

Net profit for the three months to 31 December came in at $199m (�112m), compared to $347m the year before.

Sales for the period rose from $2.54bn to $2.98bn, but failed to pass the $3bn barrier as analysts forecasted.

Amazon's results were released after the markets closed, but in after-hours trading, its shares were down 10%.

Slowing sales growth

Amazon warned that sales growth was slowing before Christmas and, until today's results, its shares had fallen 11% since mid-December.

"Operating income increased a mere 1 percent in the fourth quarter," said Todd Chanko, an analyst with Jupiter Research.

"That's not very impressive considering the fourth quarter is when retail enjoys its greatest sales."

Analysts have suggested that Amazon may be losing market share to traditional retailers such as Wal-Mart and Target as well as auction sites like eBay and search engines like Google.

There have also been concerns that the company's profit margins are being hit by the success of its "Amazon Prime" delivery programme, which offers free unlimited delivery to anyone paying a flat fee of $79 a year.