Founder, Chairman, CEO and Amazon President Jeff Bezos gives a click up as he speaks during an event about Blue Origin space exploration plans in Washington, US, May 9, 2019.
Clodagh Kilcoyne | Reuters
At a staff meeting every day in March, Amazon CEO Jeff Bezos told employees that he was fascinated by recent developments in the car industry, adding that he was one of the main reasons why he led t Amazon invested $ 700 million in the electric electricity start in February.
"If you're thinking about the car industry right now, there are so many things happening with Uber-ization, electrification, the car connected – so it's a fascinating industry," he said. Bezos is back a recording of the meeting CNBC has to hear. "It will be something very interesting to watch and take part in, and I'm very excited about that whole industry."
Bezos's comments give a rare insight into his interest in the car industry, which Amazon went to in February through his investments in Rivian and another technology that started, Aurora. Ultimately, investment in independent technology could help Amazon to deliver faster and cheaper, as well as automation in other areas, such as its cashless grocery stores.
Rivian is best known for his electric trucks and has raised $ 1.4 billion of funding to date, including $ 500 million from Ford in April. Aurora, the start of a self-driving technology run by former Uber, Google and Tesla operators, is now said to be worth over $ 2 billion following its $ 530 million funding round in February.
Following those two investments, the share of Amazon's ownership in private companies had shot to almost $ 1.4 billion in the last quarter, noting the first time it crossed the $ 1 billion mark since its disclosure. That figure in 2015. That's nearly $ 1 billion from the previous quarter, and roughly five times more than what it owned two years ago, a filing shows.
Amazon does not cut out individual investment sums, but reveals the total value of its equity and equity guarantee investments in public and private companies.
Amazon did not respond to a request for comments.
Investments are growing
Investing in independent companies gives Amazon "more insight into innovative technology" which could directly help its core e-commerce business, according to Gene Munster, an analyst at Loup Ventures. For example, the investment in electric cars and self-driving could provide an insight into improving Amazon's final mileage logistics strategy and could reduce its overall shipping costs, he said. Amazon shipping cost 21% to $ 7.3 billion last quarter.
"It's kind of external research and development," Munster said.
There are many ways in which autonomous technology could help Amazon. In January, for example, Amazon introduced a new self-introduced robot of the name Scout, and he has also worked in partnership with the start of self-driving Embark trucks to handle parts of his cargo transport. When Amazon's first loan sharks launched in 2016, Amazon said it was using the same technology found in self-drive cars.
More importantly, the investments reflect Amazon's growing desire to spend on other companies, both public and private, as the company faces slower growth despite hitting profits and cash flow.
In the first quarter, Amazon had $ 4.4 billion in operating profit and a cash balance of $ 47 billion, the two peaks. But its quarterly revenue growth was only 16.9%, the slowest since 2015.
Meanwhile, filing showed that Amazon had spent a total of $ 1.2 billion in cash payments associated with "procurement and other investment activity" in the first quarter, a record amount for a single quarter except the third quarter of 2017, when he spent $ 13.7 billion to buy Whole Foods. During the quarter, Amazon purchased Eero for about $ 100 million and CloudEndure for $ 250 million, while its two largest investments were Rivian and Aurora, according to Pitchbook. Amazon remains an aggressive investor this quarter, having led the round funding of $ 575 million in Deliveroo last week.
While that is a small amount compared to Amazon's total revenue ($ 232 billion in 2018) or assets ($ 178 billion as the first quarter), it's still a notable change of & # 39 t to a reputation for being a low corporate investor, according to Daniel Aobdia, a professor of accounting at Northwestern University.
"Amazon is increasing its investment in new businesses, and this has been made easier because of the increased cash flow of operations," said Daniel Aobdia, a professor of accounting at Northwestern University. "This is an interesting development, in line with Amazon's interest in expanding its businesses in many different directions."
During the staff meeting in March, Bezos tried to motivate expectations by saying that he doesn't consider the Rivian investment to turn into Amazon's next growth driver again. He said that it was still a minority investment and that electric cars would not become the company's next main column at any time soon.
But he went on to highlight one other reason he had been drawn to Rivian's investment: his founder and Chief Executive R.J. Scarme. In his call "amazing," Bezos touched Scaringe's long experience of a decade in auto space, adding that his personality fits perfectly with Amazon's culture and values.
"As with most of our major investments, our acquisitions, we are always looking for entrepreneurs who are mission-driven – missionaries rather than soldiers," he said. Bezos. "And the man leading the company, a man from the name R.J., is one of the greatest missionary entrepreneurs I've ever met with."
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