Amazon fortunes dive 73% as it looks to expand its online operation into OZ. Trading behemoth announced financial results for its third quarter, revealing all is not well for one of the most visited websites in the world.

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Amazon sales up, but where are the profits?

Net income dropped a dismal 73% to US$63 million, compared with a figure of $231 million a year ago. 

Operating income also dived to $79m in Q3 ending September 30- a shocking fall of $189m year on year as the trading giant looks to boost sales via heavy discounting and low profit margins.

And free cash flow decreased 17% to $1.53 bn as Amazon has invested in everything from low cost 7 inch tablets on Android said to cost AU$230 competing against the iPad 2 and Kindle’s eReader which is already on sale in Oz from Dick Smith, digital publishing and Android apps.

But analysts are far from happy, missing expectations by a mile:

“The companies’ growth plans aren’t doing enough to spur profit, rather than just sales, “Colin Sebastian, an analyst at Robert W. Baird & Co in San Francisco, told Bloomberg.

“If they don’t show a corresponding increase in earnings, investors start to scratch their heads.”

Shares tumbled by 12 percent in after hours trading in New York and the web giant has predicted operating loss $200-$250m – as much as 147% decline for Q4, one of its busiest periods.

Comparable sales rose 44% to $10.88 bn, electronics and ‘general merchandise’ categories were also on the up – jumping 59% to $6.32bn.

New categories like Amazon’s media sales grew 24% to $4.15 billion globally, which includes its Android App Store and Cloud service as well as instant video rentals for  Prime members.

International sales were $4.94 bn, up 44% from Q3 2010 marking an impressive 33% growth spurt. The giant opened an Australian office here in July and said it added 17 new fulfillment centers in total, this year.

Earlier this year, Amazon described its Oz business as “significant.”

But it is still clinging on to best-seller Kindle’s success – unleashing four new models in the US this week but with heavy discounting – Kindle Fire for $199, Touch and Touch 3G for $149, as well as a budget Kindle $79.

“In the three weeks since launch, orders for electronic ink Kindles are double the previous launch. And based on what we’re seeing with Kindle Fire pre-orders, we’re increasing capacity and building millions more than we’d already planned,” said