Web succumbs to slowdown as Amazon shares dive

NEW YORK - The digital sector is catching a cold like the rest of the market as shares in online retail giant Amazon.com, a bellwether indicator for the internet sector, plunged 14% on sharply lowered revenue outlook for 2008.

Amazon slimmed $1bn from analysts' revenue projections in yet another sign that the web is not immune to the consumer spending slowdown.

Amazon.com said it would earn between $6bn and $7bn during the fourth quarter. The lower estimate is more than $1.2bn down on the $7.2bn it had earlier forecast.

It is bad news for investors in Amazon.com as the fourth quarter accounts for more than 40% retailer's annual profit.

The news came as third quarter profits jumped by 48%, to $118m from $80m last time, boosted by free shipping offers and cut price deals.

Jeff Bezos, CEO of Amazon.com, said that Amazon would continue to invest during a prolonged recession, but would do so cautiously.

"We think that is sensible in the context of this macro environment," Bezos said.

Tom Szkutak, Amazon.com's chief financial officer, said the lowered forecast reflected "appropriately conservative assumptions".

Amazon.com said it expects annual sales to be in the range of $18.46bn to $19.46bn billion, down from July when it was forecasting $20.1bn.

Amazon's caution followed a strong third quarter, with overall revenues increasing 33% to $4.26bn and earnings up 48% to $118m, or 27 cents per diluted share.

The concern over Amazon comes at a rocky time for the internet sector as Yahoo! and eBay lay off thousands.

Yesterday Yahoo! announced it was cutting at least 1,500 jobs to cope with the weakening economy.

Earlier this month, eBay announced it was cutting its global workforce by 10% -- approximately 1,000 jobs -- as well as cutting several hundred temporary jobs and reducing open positions.

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