Jassy is in, Bezos is out: A yawn is the greatest compliment to both

-
Jeff Bezos is stepping into a more holistic role as executive chairman, meaning that Amazon is set to have a new CEO for the first time in its almost 27-year history. That person is Andy Jassy, who first joined Amazon in 1997.

In the context of Amazon's business, Jassy's credentials couldn't be stronger. Back in 2006 he led the team that set up Amazon Web Services (AWS), and he has been involved in running the division under various titles ever since — most recently as CEO.

Although most consumers know Amazon for its global e-commerce prowess, it is actually AWS that is still the profit center at the company. Amazon's most recent numbers revealed 2020 revenue of $386B. AWS made up only 12% of that revenue number, but its sky high profit margins mean it makes up almost 60% of Amazon's total operating profit.

Under Jassy's leadership AWS has grown into a market leader, with almost one-third of the cloud computing market. With that track record Jassy was always going to be a contender for the top job at Amazon, and then last summer Jeff Wilke, who had been running Amazon's consumer business, decided to retire early - leaving Jassy as sole heir apparent.

The market's reaction to Jassy's appointment and Bezos leaving has been very positive. Investors yawned at Bezos leaving, with the stock barely budging after-hours. It's as a vote of confidence that the empire Bezos built is strong enough to stand without him front-and-center and that Jassy is the right successor.

The way Bezos is stepping down as CEO and his new role are very reminiscent of the first time Howard Schultz stepped down as CEO of Starbucks. Jeff Bezos will want to avoid Schultz’s mistakes and make sure his shadow isn’t ruining it for the new CEO of Amazon. That's the biggest risk to Jassy in my opinion. I really hope that they work it out. 

For his part, if Jassy can turn Amazon into the kind of profit machine that he morphed AWS into, then his lasting legacy will be in re-engineering the business of innovation itself. He'll be guaranteed to join the hall of fame of towering businessmen and capital allocators that his predecessor tops. 

Disclaimer: This post is merely my own assessment and is not an investment recommendation. For professional advice, seek input from a licensed investment advisor.

Comments

Post a Comment

Popular posts from this blog

Bitcoin and the 99 other coins

-
So far Bitcoin is having a decent 2021. It hit a record high of more than $41.5K last week, continuing the upward trajectory it has been on since April of last year, when a single Bitcoin cost less than $5K. That rise now means that the sum of all Bitcoins in existence is worth more than $700B.  Because Bitcoin dominates much of the media's attention, it can be easy to forget just how many other cryptocurrencies there are. A quick look through the full list from coinmarketcap reveals over 100 alternative cryptocurrencies with a "market cap" of more than $100M. Each hoping that their unique take on the core blockchain technology will be enough to propel them out of obscurity, to where Bitcoin is today. With some of the names on the list you can't help but think someone is having a joke, or planning something nefarious - there is a "dogecoin", "YEP COIN", "OMG" and even "SushiSwap" (???). This time it's... different? Some of
Read more

Why the stock market is beating expectations

-
Image
  In the early stages of the pandemic, the S&P 500 index dropped a third of its value. Since then it has roared back, soaring more than 50 percent from its low in late March and setting an all-time high last week. This seems very implausible when set against the current state of the economy and the ongoing devastation caused by the pandemic. So why is the stock market rallying in the face of a pandemic and bad economic news? Several explanations are plausible. The stock market is not the economy: The stock market represents publicly traded companies only; it’s not the whole market. Most importantly, it’s always forward looking; i.e. it’s an indicator of the future earnings of those companies and how they would fare in the future. A rising stock market indicates that investors think these companies will do better in the future. On the other hand, a falling stock indicates that investors are pessimistic about the future earnings of companies. Continued income support for the econom
Read more

Netflix: No more burn?

-
In the last article on Netflix , I discussed why Netflix's promise to premiere a movie every week is not an overly ambitious strategy for the streaming giant. It's a brilliant move that isn't risky because Netflix can keep spending at this high rate for a long time. Yesterday's earnings call confirmed this. During the call, Netflix announced that it does not intend to raise any more capital, through debt or equity, as it plans to be cash-neutral this year and cash-flow positive beyond 2021. Looks like all those price increases are flowing through to the bottom line. Of course, saying you don't need any more capital is a really great way of getting people to offer you more capital at even more attractive rates (if you ever did want it).
Read more