2Q Profit Drops 58%

Seattle, Inc. said second-quarter earnings plunged nearly 58% as the on-line retailer focused on giving customers cheap or free shipping deals and spending to develop new technologies. The company also sliced its profit outlook for 2006. Investor reaction was swift, with a 12% drop in Amazon's share price in late trade Tuesday. Despite the drop in income, sales rose 22%, which the company attributed to its focus on providing customers with things they want.

Amazon said its investment in such features as free shipping and a new toy store is the right strategy for long-term growth and customer loyalty. The company said it planned to invest heavily in its new toy strategy and will cut prices on many products to continue to attract customers and build loyalty.

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