The shares of number one net retailer Amazon.com surged yesterday after rumours to the effect that the struggling company was in talks with Wal-Mart Stores to form some kind of strategic e-commerce deal.

Amazon's shares, which have lost about 83% of their value over the past year, were up 23.75% on the Nasdaq stock market in early trading.

Wal-Mart shares were up less than 1% on the New York Stock Exchange.

This weekend, the Sunday Times newspaper in Britain, citing executives close to the talks, reported that Amazon founder Jeff Bezos had met with Wal-Mart's chief executive Lee Scott to work out a deal in which Amazon would handle Wal-Mart's online strategy, as well as develop a presence in the retailer's more than 4,500 stores.

Under the terms of the deal, Amazon would receive a cash injection and a percentage of the sales it made through Wal-Mart, the Sunday Times said, although an equity investment by Wal-Mart into Amazon would be unlikely.

Wal-Mart would not comment on speculation about their business plan. Amazon.com did not immediately return calls for comment.

A handful of Wall Street analysts admitted they thought the deal would be a perfect fit, given Wal-Mart's failed attempts at building a strong presence on the web and given recent rumours that Amazon, like many e-tailers, has been thwarting off bankruptcy as it struggles to turn a profit.

Wal-Mart is the largest retailer in the world, with fourth-quarter sales topping $56.5bn (£38bn), and the company, which did not catch the dot.com fever until recently, only ventured into the fray when it relaunched Walmart.com in November last year. Last month, however, Walmart.com laid off 10% of its staff in a move to conserve cash and focus its efforts on the site's technology.

Since Amazon started selling books online in 1995, it has expanded its product offerings to include everything from music CDs to kitchen appliances, a strategy that has raised concerns that it was expanding too fast.
Reuters