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.