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Is there any chance that Amazon might spin off AWS to a separate company? Or would that be suicide to the stock price of their retail business?

abetaha 12y ago
The WSJ article seems to hint at that: > The AWS figures allow investors to value what some think could be a spinoff prospect. http://www.wsj.com/articles/amazon-swings-to-loss-despite-jump-in-sales-1429819649 http://www.wsj.com/articles/amazon-swings-to-loss-despite-ju...
icpmacdo 12y ago
What is the advantage to spinning it off to its own company?
- brianwawok 12y ago
  If they think aws growth will slow they can get a big pile of cash to put into their retail or another business.
- adventured 12y ago
  You do that when the value inside the company is being perpetually vastly under-represented (combined with shareholders applying a lot of pressure to unlock, say, a stagnant stock price). For example, if AWS is worth $100 billion in ten years, and Amazon as a whole is only being valued at $150 billion in the public market at the time. Separate the two might be worth $100 billion each at that point. The argument for eBay spinning off PayPal is this same premise - that PayPal is being undervalued by a lot hiding inside eBay.
  - chatmasta 12y ago
    Amazon is losing money as a whole, but AWS Is profitable. Isn't that the same concept as PayPal hiding in ebay?
    - adventured 12y ago
      eBay is extremely profitable, far more so than PayPal. PayPal's margins are not particularly impressive. PayPal however is growing much faster than the auction platform (which is hardly growing). The old processors like Visa and Mastercard have had amazing value increases in the last ten years. Visa is now a $160 billion company with 40% net income margins. PayPayl is a very attractive target for the big four of Visa, Mastercard, Discover, Amex. That will drive up its perceived value. One of those big four is very likely to go after a merger or acquisition of PayPal after the spin-off.
brianobush 12y ago
Seems that they are using AWS profits to fund other parts of the business. I would guess that would negate any benefits to a spinoff.
- justincormack 12y ago
  No, they could get billions to fund the rest of the business with by selling it. It would be a huge IPO. Potentially wirth more than the profits.
  - c-slice 12y ago
    If they spin it off, it likely wouldn't IPO, Amazon would be the only stock holder. All profits from AWS are already factored into Amazon's stock price, another IPO would be unnecessary
    - adventured 12y ago
      What you're talking about already exists. Amazon Web Services, Inc. is a separate corporation wholly owned by Amazon.com Inc
    - mooreds 12y ago
      There's no fundamental reason they couldn't spin off and then IPO, right? I agree, it seems unlikely in the near future given Amazon's history, but it could happen. Maybe 10-20 years from now when Bezos has retired, a new CEO or three has been in place and the public markets aren't as forgiving of Amazon as they are now.
  - adventured 12y ago
    They'll spin it off one day, for the same reason Walmart sold off its massive trucking business. AWS is eventually going to be a $30 billion sales business, capable of generating $3+ billion in net income. It'll legitimately be a nearly $100 billion market cap company unto itself in ten years. If Amazon is smart, they'll wait until it achieves a much larger scale before spinning it off, it's obviously a huge pot of gold in the equity value.
c-slice 12y ago
I doubt it, AWS wills be one of the few profitable bright spots in amazons earnings calls. Clearly they're interested in developing it further and making it a key part of their business. Generally companies spin of areas if it's outside of their core business.
Axsuul 12y ago
I highly doubt this. Amazon's long-term strategy is to sell its infrastructure (servers, shipping, etc). This allows them to not only compete with competitors but sell pickaxes.
justicezyx 12y ago
Everything the AWS all-hands, Andy will mention that AWS would be as big as the retail. Andy is not a man who jokes often. Then I do not believe Jeff wants it to leave the Amazon family.
justicezyx 12y ago
Everything the AWS all-hands, Andy will mention that AWS would be as big as the retail. Andy is not a man who jokes often. Then I do not believe Jeff wants it to leave the Amazon family.
bluedino 12y ago
Who the heck would buy it? Google? Microsoft? IBM? That would be hilarious.

abetaha 12y ago

The WSJ article seems to hint at that: > The AWS figures allow investors to value what some think could be a spinoff prospect. http://www.wsj.com/articles/amazon-swings-to-loss-despite-jump-in-sales-1429819649 http://www.wsj.com/articles/amazon-swings-to-loss-despite-ju...

icpmacdo 12y ago

What is the advantage to spinning it off to its own company?

brianwawok 12y ago
If they think aws growth will slow they can get a big pile of cash to put into their retail or another business.
adventured 12y ago
You do that when the value inside the company is being perpetually vastly under-represented (combined with shareholders applying a lot of pressure to unlock, say, a stagnant stock price). For example, if AWS is worth $100 billion in ten years, and Amazon as a whole is only being valued at $150 billion in the public market at the time. Separate the two might be worth $100 billion each at that point. The argument for eBay spinning off PayPal is this same premise - that PayPal is being undervalued by a lot hiding inside eBay.
- chatmasta 12y ago
  Amazon is losing money as a whole, but AWS Is profitable. Isn't that the same concept as PayPal hiding in ebay?
  - adventured 12y ago
    eBay is extremely profitable, far more so than PayPal. PayPal's margins are not particularly impressive. PayPal however is growing much faster than the auction platform (which is hardly growing). The old processors like Visa and Mastercard have had amazing value increases in the last ten years. Visa is now a $160 billion company with 40% net income margins. PayPayl is a very attractive target for the big four of Visa, Mastercard, Discover, Amex. That will drive up its perceived value. One of those big four is very likely to go after a merger or acquisition of PayPal after the spin-off.

brianobush 12y ago

Seems that they are using AWS profits to fund other parts of the business. I would guess that would negate any benefits to a spinoff.

justincormack 12y ago
No, they could get billions to fund the rest of the business with by selling it. It would be a huge IPO. Potentially wirth more than the profits.
- c-slice 12y ago
  If they spin it off, it likely wouldn't IPO, Amazon would be the only stock holder. All profits from AWS are already factored into Amazon's stock price, another IPO would be unnecessary
  - adventured 12y ago
    What you're talking about already exists. Amazon Web Services, Inc. is a separate corporation wholly owned by Amazon.com Inc
  - mooreds 12y ago
    There's no fundamental reason they couldn't spin off and then IPO, right? I agree, it seems unlikely in the near future given Amazon's history, but it could happen. Maybe 10-20 years from now when Bezos has retired, a new CEO or three has been in place and the public markets aren't as forgiving of Amazon as they are now.
- adventured 12y ago
  They'll spin it off one day, for the same reason Walmart sold off its massive trucking business. AWS is eventually going to be a $30 billion sales business, capable of generating $3+ billion in net income. It'll legitimately be a nearly $100 billion market cap company unto itself in ten years. If Amazon is smart, they'll wait until it achieves a much larger scale before spinning it off, it's obviously a huge pot of gold in the equity value.

c-slice 12y ago

I doubt it, AWS wills be one of the few profitable bright spots in amazons earnings calls. Clearly they're interested in developing it further and making it a key part of their business. Generally companies spin of areas if it's outside of their core business.

Axsuul 12y ago

I highly doubt this. Amazon's long-term strategy is to sell its infrastructure (servers, shipping, etc). This allows them to not only compete with competitors but sell pickaxes.

justicezyx 12y ago

Everything the AWS all-hands, Andy will mention that AWS would be as big as the retail. Andy is not a man who jokes often. Then I do not believe Jeff wants it to leave the Amazon family.

justicezyx 12y ago

Everything the AWS all-hands, Andy will mention that AWS would be as big as the retail. Andy is not a man who jokes often. Then I do not believe Jeff wants it to leave the Amazon family.

bluedino 12y ago

Who the heck would buy it? Google? Microsoft? IBM? That would be hilarious.