Amazon, an online retail giant has announced a sharp fall in profits and also warned about dis-satisfactory than expected results this year.

Net income of Amazon for the last three months of 2011 was $177m as compared to $416m in 2010. This fall in net revenue came against an increase in revenues during the period to $17.43bn which is up by 35%

As the company continues to invest, so the company warned that it may lose more money during the first quarter of this year. Investors reacted to the disappointing prediction, due to this shares of the Amazon fell more than 8% in after hours trading.

“Amazon is not a cheap stock, so any type of disappointment, we typically see a pretty meaningful reaction by the market,” said James Lee, analyst at Credit Agricole.

Kindle Sales

However, despite of the fall in revenue, US sales of its most popular series of e-book readers, The Kindle, surged during the last 9 weeks of the previous year, increasing by 177% , the company announced.

The sales accompany with the release in the US of its new touch screen Kindle Fire tablet.

Jeff Bezos, CEO of said “We are thankful to the millions of customers who bought the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our best-selling product across the Europe and US,” .

The company’s prediction that the sales of its products will keep on rising during the beginning of this year but also warned that it may find difficult to make a profit as it continues to invest.