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Comment by colinbartlett | Hacker News Reader

Is there any chance that Amazon might spin off AWS to a separate company? Or would that be suicide to the stock price of their retail business?

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Seems that they are using AWS profits to fund other parts of the business. I would guess that would negate any benefits to a spinoff.

No, they could get billions to fund the rest of the business with by selling it. It would be a huge IPO. Potentially wirth more than the profits.

If they spin it off, it likely wouldn't IPO, Amazon would be the only stock holder. All profits from AWS are already factored into Amazon's stock price, another IPO would be unnecessary

What you're talking about already exists.

Amazon Web Services, Inc. is a separate corporation wholly owned by Amazon.com Inc

There's no fundamental reason they couldn't spin off and then IPO, right?

I agree, it seems unlikely in the near future given Amazon's history, but it could happen. Maybe 10-20 years from now when Bezos has retired, a new CEO or three has been in place and the public markets aren't as forgiving of Amazon as they are now.

They'll spin it off one day, for the same reason Walmart sold off its massive trucking business.

AWS is eventually going to be a $30 billion sales business, capable of generating $3+ billion in net income. It'll legitimately be a nearly $100 billion market cap company unto itself in ten years. If Amazon is smart, they'll wait until it achieves a much larger scale before spinning it off, it's obviously a huge pot of gold in the equity value.

If they IPO'd, Bezos would be under humungous pressure to give it all out as dividends. Given his business beliefs, it'll never happen. It's not like they have cashflow problems anyway.

The WSJ article seems to hint at that:

> The AWS figures allow investors to value what some think could be a spinoff prospect.

http://www.wsj.com/articles/amazon-swings-to-loss-despite-ju...

I doubt it, AWS wills be one of the few profitable bright spots in amazons earnings calls. Clearly they're interested in developing it further and making it a key part of their business. Generally companies spin of areas if it's outside of their core business.

I highly doubt this. Amazon's long-term strategy is to sell its infrastructure (servers, shipping, etc). This allows them to not only compete with competitors but sell pickaxes.

What is the advantage to spinning it off to its own company?

If they think aws growth will slow they can get a big pile of cash to put into their retail or another business.

You do that when the value inside the company is being perpetually vastly under-represented (combined with shareholders applying a lot of pressure to unlock, say, a stagnant stock price).

For example, if AWS is worth $100 billion in ten years, and Amazon as a whole is only being valued at $150 billion in the public market at the time. Separate the two might be worth $100 billion each at that point.

The argument for eBay spinning off PayPal is this same premise - that PayPal is being undervalued by a lot hiding inside eBay.

Amazon is losing money as a whole, but AWS Is profitable. Isn't that the same concept as PayPal hiding in ebay?

eBay is extremely profitable, far more so than PayPal. PayPal's margins are not particularly impressive.

PayPal however is growing much faster than the auction platform (which is hardly growing).

The old processors like Visa and Mastercard have had amazing value increases in the last ten years. Visa is now a $160 billion company with 40% net income margins. PayPayl is a very attractive target for the big four of Visa, Mastercard, Discover, Amex. That will drive up its perceived value. One of those big four is very likely to go after a merger or acquisition of PayPal after the spin-off.

Who the heck would buy it? Google? Microsoft? IBM? That would be hilarious.

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