Amazon's new CEO is a 'cloud titan' — here's why that matters
Amazon.com, Inc. (AMZN)
Microsoft Corporation (MSFT)
Alphabet Inc. (GOOG)
Alphabet Inc. (GOOGL)
Oracle Corporation (ORCL)
International Business Machines Corporation (IBM)
Alibaba Group Holding Limited (BABA)
Alibaba Group Holding Limited (BABAF)
Wednesday, February 3, 2021
This article was first featured in Yahoo Finance Tech, a weekly newsletter highlighting our original content on the industry. Get it sent directly to your inbox every Wednesday by 4 p.m. ET. FOLLOW
Amazon (AMZN) is getting a new CEO, and he’s the same executive who turned the e-commerce giant into a cloud computing juggernaut. Andy Jassy, the head of Amazon’s Amazon Web Services (AWS), will replace Jeff Bezos as CEO in the third quarter.
The change means Amazon will likely pour even more resources into its all-important, $45 billion-a-year cloud business. While Amazon is estimated to control 45% of the cloud market, competitors like Microsoft and Google are clawing away at its lead.
It’s no coincidence the person behind AWS will now lead Amazon. “This is a doubling down on AWS and the cloud services strategy,” Wedbush analyst Dan Ives told Yahoo Finance. “Jassy is a cloud titan. He's really helped build the cloud industry to where it is today.”
But that doesn’t mean Amazon will take its foot off the gas in terms of its e-commerce platform. On the contrary, if Jassy follows the same playbook as Bezos, Amazon will only grow bigger after recording one of its best quarters ever on Tuesday.
Doubling down on the cloud
Founded in 2006, AWS is one of Amazon’s greatest successes. To be sure, in terms of overall revenue, e-commerce dwarfs AWS, with 2019 full year retail revenue coming in at $340 billion compared to AWS’s $45.47 billion. But that hardly tells the whole story.
Despite earning less revenue, AWS crushes Amazon’s e-commerce efforts in terms of margins. In 2019, retail operating income was $9.37 billion, while AWS’s was an incredible $13.5 billion.
But despite being a cloud innovator, Amazon faces fierce competition. Microsoft (MSFT) is nipping at AWS’s heels with its own cloud platforms including Azure, while Google (GOOG, GOOGL) continues to build out its own formidable cloud services.
In this Dec. 5, 2019, file photo, AWS CEO Andy Jassy, discusses a new initiative with the NFL during AWS re:Invent 2019 in Las Vegas. (Isaac Brekken/AP Images for NFL, File)
Microsoft, according to Gartner, now controls 18% of the cloud market, while Google has 5%. And a slew of other competitors are in the running including IBM (IBM), Alibaba (BABA), and Oracle (ORCL), all hoping to snag their own piece of the growing cloud industry.
“Microsoft is narrowing that gap, as we're seeing even play out this quarter,” Ives said. “So Jassy getting anointed as CEO makes a ton of sense given the cloud strategy.”
With Jassy as CEO, Amazon will have a leader who’s aware of the threat posed by its cloud rivals, and who has a proven track record of innovation in the lucrative cloud industry.
Jassy and Bezos are ‘cut from the same cloth’
Bezos founded Amazon in 1994 out of his parents’ Seattle garage as an online book retailer. And just three years later, Jassy joined Amazon after receiving his MBA from Harvard.
Jassy has spent 23 years at Amazon, which included expansions into music, movies, original content, grocery, and, of course, AWS. It’s clear he and Bezos have a similar vision.
“He was an early employee and with that comes kind of an indoctrination of the culture,” Patrick Moorhead, president of Moor Insights & Strategy, told Yahoo Finance. “I would find it hard to imagine that they're not cut from similar cloth. It's a very facts and detail, analytical type of background. And that's what I’ve seen with Andy Jassy.”
Jeff Bezos will step down as CEO sometime in the company's third quarter. (Credit: Dennis Van Tine/MediaPunch /IPX)
Following the announcement, analysts predicted that Jassy will carry on the same practices as Bezos, down to providing a summary of every executive meeting’s purpose.
“We don’t think a lot is going to change, with Jassy likely to carry on Bezos’ same core values & beliefs given similar operating cultures between consumer [and] AWS,” J.P. Morgan analyst Doug Anmuth wrote.
Amazon isn’t done expanding
Under Bezos, Amazon grew from an online book retailer to a grocer, movie and TV studio, pharmaceutical retailer, and cloud juggernaut. And that’s unlikely to stop under Jassy.
Bezos has always prioritized the customer, going so far as to forgo turning a profit for Amazon’s first seven years. During a 2018 speech before the Economic Club of Washington, Bezos said Amazon’s success came from its “obsessive compulsive focus on the customer, as opposed to obsession over the competitor.” And Jassy, a long-time Bezos lieutenant, will likely carry on that mission.
“Mr. Bezos has built [Amazon] along the lines of the flywheel effect that is often discussed, and we expect Andy Jassy as CEO to mean a continuation of [Amazon’s] key themes of delighting the consumer and executing as scale builds and compounds in all of its businesses,” UBS Global Research’s Eric Sheridan wrote.
And Amazon has plenty of room to grow. While it’s the undisputed king of e-commerce, its overall retail market share is still in the single digits. Then there are its other businesses, including Prime Video, which lags behind Netflix’s 203 million subscribers. Then there’s Amazon’s nascent video game efforts, which have hit a wall, but have Jassy’s backing.
“The overall objective at Amazon is to sell everything to anybody and everybody on the planet,” Moorhead said.
While Bezos is giving up his CEO position, Jassy is likely to continue chasing down that same goal. If Amazon’s cloud business is any indication, the new CEO may very well achieve that dream.
By amazonfree, tech editor. Follow him at @amazonfree
More Tech News
Alphabet beats analyst expectations with cloud business continuing to grow
'Spill the beans man:' Tesla's Elon Musk grills Robinhood CEO on GameStop/Reddit trading saga
Ford names Google preferred cloud provider, all vehicles will run Android by 2023
BABA earnings and revenue beat expectations
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance Live on Steemit @yahoofinancelive
**Nice post thanks for @amazonfree