By Zeba Fatima

Amazon.com said its fourth quarter profit dropped 58% from last year, as higher costs and expenses offset a 35% increase in net sales.

A huge increase in investment in product inventories, especially the Kindle Fire, has led to a significant drop in net income at the business however: down 58 % in the quarter and 45 % in the full-year to US $631 million.

“We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the US and Europe," said Amazon CEO and founder, Jeff Bezos.

“Our millions of third-party sellers had a tremendous holiday season with 65 % unit growth and now represent 36 % of total units sold.” said Bezos.

Bridging the gap between e-readers and tablet devices, the Kindle Fire represents an opportunity for Amazon to steal some of the iPad’s market share and the company has invested a lot of money in both development and production in order to keeping its selling price low.

Although the new products is not available outside of the US at present, sales across the multi-product retailer’s international websites also showed strong growth during the fourth quarter.

Its international segment, which includes its UK, German, Japanese, French, Chinese, Italian, and Spanish operations, saw revenues rise 31 % to US $7.53 billion during the period although once favourable exchange rates are excluded the growth was only 29 %.

For the full year Amazon expects to report between a 162 % and 69 % drop in operating income, a range of US-$200 million to US +$100 million.