Moonshot Monday: Amazon Should Spin-Off AWS – Amazon.com, Inc. (NASDAQ:AMZN)

HyperChange TV – Moonshot Monday #22

Intro – AWS As A Stand-Alone Business

Founded in 2006, Amazon’s (AMZN) cloud-computing business, known as AWS, has quickly become one of the most dominant companies in a new era of enterprise software.

Its business of renting out servers had humble beginnings, but AWS is now raking in billions of dollars.

As of Q2 ’17, the business was operating at an annualized revenue run-rate of $16.4B, and an operating earnings run-rate of $3.7B.

Although this is already a giant business, it looks like it’s about to get a lot bigger.

The many industry tailwinds that AWS is riding, are poised to continue for years to come. As the consumption and creation of data continue to explode, the demand for cloud-computing is rising in parallel.

Wikibon estimates that enterprise spending on cloud-computing will rise at a 16% CAGR from 2016-2026.

AWS is by far the market leader in this space and will capture the bulk of its growth.

But it’s not all rainbows and butterflies.

Competitor Backlash Is Growing

Both Amazon’s e-commerce business and AWS have become so ubiquitous, that conflicts of interest are getting more and more prevalent.

For example, Wal-Mart (WMT) is so concerned with Amazon leveraging the retailer data it has on AWS to its advantage, that is has banned its vendors from using the service.

This move reflects a wider sentiment across the retail industry that Amazon’s services are becoming too pervasive. Recently Target (TGT) announced that it was migrating away from using AWS, as its competition with Amazon’s retail business intensifies.

Although Amazon is adamant that it treats all customers on AWS the same and protects the privacy of their data, the competition is clearly skeptical.

Many other AWS customers may begin to follow in Wal-Mart and Target’s footsteps as the competition with Amazon accelerates.

Fashion companies like Nordstrom (JWN) also rely heavily on AWS and are likely candidates to pull the plug on AWS as Amazon’s…

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