Amazon Unlikely To Spin Off AWS Cloud Unit
Oppenheimer analyst says it's "inevitable" Amazon Web Services will untether from its parent company, but Amazon disagrees.
Amazon Web Services has always been different from its parent, Amazon.com. The latter, of course, is a retail operation that generated a mammoth $61.1 billion in sales in 2012. AWS, on the other hand, is a new kind of wholesaler, distributing compute cycles from cloud data centers at rock bottom prices and generating a more modest estimated $2.1 billion in sales.
So will these two dissimilar businesses remain under the same roof forever? Timothy Horan, an analyst at investment firm Oppenheimer & Co., said in a research report that it's "inevitable" that Amazon will spin off Amazon Web Services.
A Horan-authored research report was quoted Feb. 11 in Investor's Business Daily as saying such a move was "inevitable" due to potential conflicts between AWS and other Amazon.com customers and the greater value that AWS would have if it stood alone in the marketplace.
"We believe an ultimate spinoff of AWS is inevitable due to its channel conflicts and the need to gain scale," Horan wrote. "We see the business as extremely valuable on a stand-alone basis, possibly even operating as a REIT," he wrote. REITs (real estate investment trusts) are companies that own income-producing real estate, a description that matches Amazon Web Services' cloud data centers. REITs are not strictly defined; in addition to commercial real estate, such as office buildings and warehouses, REITs own hospitals, hotels and timberland.... Read full story on InformationWeek
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