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While it may be in AWS’s best interest to become a separate company, especially as it will no longer be footing the bill for Amazon’s low-margin retail business, Amazon may come to the decision under pressure. In Horan’s opinion, the new competitive landscape — Google (NASDAQ:GOOG) is challenging Amazon in both Internet retailing and clouding computing — will increase the “number of defections” from AWS and cause a loss of market share that will force the Internet company to separate its businesses.
But despite Horan’s confidence in the mutual benefits, it may be difficult for Amazon Chief Executive Officer Jeff Bezos to surrender the company’s so-called crown jewel. That sentiment was made clear in an interview the head of Amazon Web Services Andy Jassy gave the Telegraph at the end of December. “At the highest levels of this company, we believe that it’s quite possible that AWS ends up being the largest business in Amazon,” he said, comparing the arrival of cloud infrastructure services to the replacement of independent power generation with an efficient/scalable national grid.
While Amazon does not divulge the details of AWS’s financials, the profitability of its infrastructure-as-a-service unit is assured. Analysts have estimated that its 2012 sales greatly increased from its estimated figure from 2011. Horan placed its revenue at more than $2.1 billion, representing a 77 percent increase from the previous year. But AWS’s 2012 revenue also represents a very small percentage of the $61.09 billion in revenue the company generated in 2012, making it seem more likely that Amazon could let the division go public. It is by far the largest provider of infrastructure-as-a-service, and so it would likely fetch a large initial public offering price.
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