Posted January 15, 2013 by Karen Kinsey in Technology

Cloud computing the next big revenue generator for Amazon.com, Inc. (NASDAQ:AMZN)- NFLX & BKS


After years of relying on the efficiency of e-commerce Amazon.com, Inc.(NASDAQ:AMZN) is all set to skim its largest other-income unit; its web services unit aka Amazon Web Services(AWS) which sells cloud-computing and cloud storage.

The world’s largest online retailer captured instant success due to supply-chain efficiencies inherent within its business model. The company has managed to maintain its cost-leadership through the obvious edge of “online” since its inception as a bookseller. It replaced storefronts and head counts with technology and the payout was huge. Survival amid thin margins, price wars and a long term growth rate eclipsing that of arch-rival Barnes and Noble Inc.(NYSE:BKS).

For years the site is the last resort for customers seeking the comfort of online without having to pay a premium price for the same. Through its web services leg the company is aiming to develop into the high-margin of cloud-based services’ sector.

According to a Macquarie Capital estimate the $2.1 billion revenues of Amazon Web Services (AWS) during the year 2012, could swell to $3.8 billion by 2013. This is an 81% increase as against a bleak 25% growth for the company’s core retail segment. Further ahead in time revenues could grow up to $8.8 billion by the end of 2015, the research report led by Ben Schachter predicts. This level of revenues could make it a significant segment contributing up to 7% of total revenues for the company.

Amazon Web Services (AWS) is one of the fastest growing revenue generating units of Amazone.com Inc., (NASDAQ:AMZN). From a meek start it is expanding into a full fledged business which could be worth up to $30million if taken as an independent company, according to the report.

The unit just launched a management console which facilitates Android users to manage CloudWatch alarms and Elastic compute Clouds. The diversified clientele include: retailers, E-commerce ventures, startups and larger enterprise players. Most notable and surprising customer relationships to boast of is Prime-instant-video rival, Netflix Inc.(NASDAQ:NFLX). This partnership also depicts how independent the unit is in its sales and pricing strategies.

Web services bear a 100% gross margin and a faster growth rate will impact positively on the company wide margins. This could transform the Amazone.com Inc. (NASDAQ:AMZN)’s profile of a thin-margin retailer into a high-end diversified web-tech concern.
Amazon.com Inc. (NASDAQ: AMZN) does not report AWS results separately. Macquarie Capital is the asset management leg of Macquarie Group Limited.

Amazon.com, Inc (NASDAQ:AMZN)’s shares were up by 1.79% to $272.73, Barnes and Noble Inc.(NYSE:BKS) shares were up 3.21% to $13.17, Shares of Netflix Inc.(NASDAQ:NFLX) were up by 2.13% to close at $103.44.

Karen Kinsey

Karen Kinsey with a degree in journalism. She ended up going into the education field and has been a teacher for the past six years. Karen Kinsey is a television producer, writer, editor, professor, wife, mother, sister, daughter, friend and longtime, diehard Phillies fan. Karen Kinsey writings have been featured in such mainstream media as The Guardian, USA Today, Global Times, China Daily, Beijing Review, among others.