Amazon’s hardware is the ultimate black box
com’s material ambitions grow – and get stranger – year after year. But there has long been a method to the corporate madness, even if investors find it difficult to quantify it.
The e-commerce giant has expanded its own product line in recent weeks. Amazon announced its first branded TVs in early September, priced from $ 370 to over $ 1,000. Last week, updates were made to Amazon’s Kindle Paperwhite e-readers. And earlier this week, the company showcased 10 new products ranging from its first smart thermostat to its first home robot. Amazon also finally announced launch plans for a small drone called the Ring Always Home Cam designed to fly around the house as a safety monitor; this device was first announced last year but never went on sale.
The latter two are referred to as headline gimmicks and unlikely to generate much sales volume. The robot alone costs $ 1,000 and has been touted primarily as a rolling videophone used to keep tabs on aging parents. This is because the Astro Robot and drone are sold by invitation only as so-called Day 1 editions, an Amazon program that distributes early releases of new products to a select group of buyers.
David Limp, Head of Amazon Devices and Services, told Wired magazine that the company hopes customers will provide more “unique use cases” for the robot.
But Amazon’s hardware efforts shouldn’t be underestimated based on its strangest attempts, or even known flops such as the Fire Phone. Starting with the first Kindle e-reader in late 2007, Amazon has racked up significant successes that have either pioneered new market segments or taken a strong position in existing segments. The company’s Echo line-up sells more than 35 million devices a year and has dominated the smart speaker market with a 30% share in each of the past two years, according to Canalys.
Amazon’s Fire TV has long ranked second behind Roku among streaming TV devices in North America, according to data from Parks Associates.
It remains to be seen if any of the company’s latest gadgets will reach these levels, although the success of Fire TV provides a solid foundation for new TVs that will start shipping later this month. But while Amazon’s hardware business is perhaps the biggest of the big tech companies that isn’t called Apple,
most investors are still unaware of its impact on the whole company. Amazon has flatly refused to quantify the activity, and few to no Wall Street analysts have attempted to do so either. It probably only represents a small portion of Amazon’s $ 443 billion in revenue over the past four quarters. But even Microsoft is reporting sales data for its Surface devices, which represent less than 4% of the software giant’s total annual revenue.
Of course, the financial impact of Amazon devices goes far beyond their initial sales. According to the Association of American Publishers, Kindle has virtually created the e-book business which now generates more than $ 1 billion a year in sales in the United States. And the Echo speakers have helped make Amazon a player in music streaming; a poll by Evercore ISI earlier this year found Amazon Music to be the second most popular paid streaming service after Spotify.
Mr. Limp said on Tuesday that Amazon’s goal was to create devices “deeply integrated with services”. Subscription services currently generate around $ 29 billion in revenue per year for Amazon, and Wall Street expects them to reach nearly $ 40 billion by the end of next year. It’s even without a robot roaming your house.
Write to Dan Gallagher at firstname.lastname@example.org
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