Amazon.com reported that last quarter's sales will be more than £644 million, a 40 percent increase over the same period in 1999.

The online retailer attributed much of the increase to growth in sales in areas other than books, one of the company's core products.

"This holiday season, customers purchased record amounts from our electronics, kitchen and tools stores," said Amazon CEO Jeff Bezos. "More than 35 percent of US customers made purchases during the quarter from a store other than books, music or DVD/video. And, for the second quarter in a row, the electronics store was the second-largest US store, behind books."

The online retailer still reported an operating loss of seven percent of net sales, compared with 1999's loss of 26 percent in the fourth quarter.

Though the improvements are promising, revenues for the Internet retailer came in at the low end of expectations for the holiday season and the company has not yet seen a profit.

According to industry watchers the combination of the slowing economy and the fact that investors' are taking a hard line on online-only retailers that fail to show a profit will make it difficult for Amazon this year.

But Amazon's brand recognition and infrastructure are strong points in its favour and should keep the company viable despite the obstacles.