Sotheby's profits hammered by Web investments

International auction house Sotheby's has announced first quarter losses of $29m, compared to losses of $9.5m for the same period last year - a drop the company attributes to its extensive investment in online projects.

The company pumped $60m into Internet ventures, including its online arm Sothebys.com and a joint venture with Amazon.com. However, poor sales and escalating costs have meant that losses have risen well above the previous year's figures.

The cost of running the Internet services accounted for the rise in first quarter operating expenses, up to $98.3m, of which $19.2m went exclusively on Internet sites.

Meanwhile first quarter auction sales of over $176m represented a 25 per cent decrease on last year, and operating revenues of $54.8m were down 13 per cent from last year.

The poor results were also partially blamed on legal costs of $1.8m relating to a US Department of Justice anti-trust probe.

However, William Ruprecht, president and CEO of Sotheby's Holdings, said the company was "extremely pleased" with the results. He claimed that heavy spending on Internet services in the first quarter was because of an extensive marketing campaign, and that spending in subsequent quarters would be lower.

Ruprecht added that due to the seasonal nature of the art auction market, first quarter results were usually low, representing 11 to 13 per cent of total annual sales, and were not indicative of expected full year results.