Amazon.com Inc. (AMZN) is a leader in e-commerce and cloud computing and one of the largest companies in the world. It has a market capitalization of $1.9 trillion as of July 7, 2021. The company was launched by founder Jeff Bezos in 1994 as an online bookstore but has diversified into an e-commerce giant that sells virtually everything, including electronics, apparel, furniture, food, toys, and much more.
In addition to e-commerce, Amazon’s revenue comes from subscription services, cloud computing services, Whole Foods grocery sales, and other areas. It also builds and sells its own consumer electronics, such as the Amazon Kindle and Amazon Echo. For fiscal year 2020, Amazon reported net sales of $386.1 billion and net income of $21.3 billion.
Bezos stepped down as Amazon’s chief executive officer (CEO) on July 5, 2021, after first announcing his departure in early February 2021. Bezos will remain with the company as its executive chairman and will hand the CEO role to Andy Jassy. Jassy first joined Amazon in 1997 and most recently served as CEO of Amazon Web Services, the company’s cloud platform.
Amazon continues to face scrutiny from antitrust regulators. It currently faces a wide-ranging antitrust investigation into its business practices by the Federal Trade Commission (FTC). The company recently filed a request with the FTC seeking the recusal of Lina Khan, the commission’s new chairwoman, over concerns of her impartiality. Khan has been a leading critic of Amazon and other big tech companies in the past, and was recently installed as the agency’s head by President Biden after she was confirmed by the U.S. Senate in June 2021.
Below, we look in detail at five of Amazon’s most important acquisitions and its proposed $8.5 billion acquisition of MGM Holdings Inc. The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes to Amazon. Fiscal year (FY) 2020 financial results for the pending acquisition are provided.
Whole Foods Market
- Type of business: Organic grocery store
- Acquisition price: $13.7 billion
- Date it was purchased: Aug. 28, 2017
Whole Foods is a prominent grocery store chain with the distinction of being the only U.S. Department of Agriculture (USDA)-Certified Organic grocer in the United States. The company was founded in 1978 as Safer Way.
At the time of its acquisition by Amazon, Whole Foods was an independent company with a market cap of almost $10 billion. It was ranked No. 176 on the 2017 Fortune 500 list. Since then, Amazon has lowered prices on key food items and integrated its Prime service into the Whole Foods customer experience.
Whole Foods, which has hundreds of stores, is Amazon’s biggest reported acquisition to date in terms of price, and it also was Amazon’s first major step into brick-and-mortar retailing.
Amazon has combined the ordering sites for its free delivery service, Amazon Fresh, and Whole Foods Market, making it a simple matter for customers to place their orders. Amazon also has expanded by opening Amazon Fresh stores in 13 locations as of late May 2021. However, Whole Foods has yet to prove successful as an acquisition for Amazon. Amazon’s sales through its Whole Foods business have been weak. Its physical-stores segment, which mainly is in-person sales at Whole Foods, has seen its revenue fall since 2018, the first full year of integration after the grocery chain’s purchase by Amazon. The segment’s year-over-year revenue declined 16% in the March quarter of 2021.
- Type of business: Footwear and apparel retailer
- Acquisition price: $1.2 billion
- Date it was purchased: Nov. 2, 2009
Zappos is the leading footwear and apparel website in the world. The name comes from the word zapatos, which means “shoes” in Spanish. The company was founded in 1999 and grew rapidly, remaining independent until the time of its acquisition by Amazon in 2009. The company is famed for its customer service, and in 2010, its CEO, Tony Hsieh, released a bestseller called Delivering Happiness that details his management style. While Amazon does not provide revenue figures on Zappos, Forbes indicated in 2015 that it generated more than $2 billion in revenue annually.
Zappos stands out among Amazon’s many acquisitions because it was one of the company’s first major expansions into a retail area beyond books.
- Type of business: Robotics
- Acquisition price: $775 million
- Date it was purchased: March 19, 2012
Kiva Systems, now rebranded as Amazon Robotics, was one of Amazon’s largest purchases at the time of its acquisition in 2012. Founded in 2003, the company develops and manufactures robotic systems for a variety of uses and was independent at the time of its acquisition.
Compared with Amazon’s other deals, Kiva Systems is unique. Amazon has not integrated Kiva’s products into its platform of e-commerce offerings, as it has done with other acquisitions. While Kiva’s role is unclear, its specialization in automated storage and retrieval systems could provide major support to Amazon’s logistics operations, which include thousands of robots that aid the company’s delivery services.
- Type of business: Online pharmacy
- Acquisition price: $753 million
- Date it was purchased: June 28, 2018
PillPack Inc. is an online pharmacy company that was founded in 2013. Amazon acquired the company in 2018 in a move seen as an effort to expand into the online prescription business.
Aided by Amazon’s extensive delivery network, the company’s purchase of PillPack allows it to ship prescription medications overnight to locations across the country. Like Amazon’s purchases of Whole Foods and Zappos, PillPack has retained its brand within Amazon’s larger umbrella of subsidiaries.
- Type of business: Livestreaming video
- Acquisition price: $970 million
- Date it was purchased: Aug. 25, 2014
Twitch Interactive’s popular livestreaming video platform, called Twitch, was launched in 2011. In July 2014, just prior to Amazon’s acquisition, Twitch had 55 million unique visitors.
This platform is popular among video game enthusiasts in particular and aided Amazon’s expansion into the video game and streaming industries.
MGM Holdings Inc. (Acquisition Pending)
- Type of business: Production and distribution of film and TV content
- Acquisition price: $8.5 billion
- Date it was purchased: May 26, 2021 (announced)
- Annual revenue (2020): $1.5 billion
- Annual net income (2020): $33.2 million
MGM, which stands for Metro-Goldwyn-Mayer, is an entertainment company focused on the production and distribution of film and TV content. It was first formed in 1924 by a merger of Metro Pictures Corp., Goldwyn Pictures, and Louis B. Mayer Productions. Today, the company owns an extensive library of premium film and TV content, including two of the most successful film franchises in cinematic history: James Bond and Rocky.
Amazon announced in late May that it had agreed to acquire MGM for $8.5 billion. If approved, it would be Amazon’s second largest acquisition after Whole Foods. The deal is still pending and subject to regulatory approval. The agency handling the review of the acquisition is the FTC, whose new chairwoman has been a vocal critic of Amazon’s size, as mentioned above.
Acquiring MGM would help to bolster Amazon’s catalogue of intellectual property, especially its streaming Prime Video service. The deal is a sign that Amazon is positioning itself to continue to grow amid the escalating streaming media wars with giants Netflix Inc. (NFLX) and Walt Disney Co. (DIS), as well as the new media company to be formed through the pending merger of AT&T Inc.’s (T) WarnerMedia and Discovery Inc. (DISCA).
Amazon Diversity & Inclusiveness Transparency
As part of our effort to improve the awareness of the importance of diversity in companies, we have highlighted the transparency of Amazon’s commitment to diversity, inclusiveness, and social responsibility. The below chart illustrates how Amazon reports the diversity of its management and workforce. This shows if Amazon discloses data about the diversity of its board of directors, C-Suite, general management, and employees overall across a variety of markers. We have indicated that transparency with a ✔.
|Amazon Diversity & Inclusiveness Reporting|
|Race||Gender||Ability||Veteran Status||Sexual Orientation|
|Board of Directors|
|General Management||✔ (U.S. Only)||✔|
|Employees||✔ (U.S. Only)||✔|
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