Amazon posts a 51% drop in profit

Amazon.com Inc. on Thursday gave a 2007 sales forecast that topped Wall Street targets and posted a 51% drop in quarterly profit that still beat expectations.

Amazon’s fourth-quarter net income dropped to $98 million, or 23 cents a share, from $199 million, or 47 cents, a year earlier because of higher taxes and investment spending. Sales rose 34% to $3.99 billion.

Wall Street analysts, on average, had expected the company to post earnings of 21 cents a share on sales of $3.78 billion, according to Reuters Estimates.

“People see 34% revenue growth, which is good,” said Global Crown Capital analyst Martin Pyykkonen. “It’s been trending down, so this is definitely a positive surprise on the revenue side.”

Sales were driven by strength in electronics, which constitute about one-third of Amazon’s global business and climbed 55% during the quarter.

Operating income rose 20% to $197 million. Operating profit margins narrowed during the quarter as marketing, technology and content costs rose.

Looking to 2007, Amazon gave full-year targets for operating earnings of $355 million to $505 million on revenue of $13 billion to $13.7 billion.

Analysts had been expecting revenue of $12.57 billion for the year, according to Reuters Estimates.