How to Break Amazon Into Pieces

The federal government has threatened to lessen the power of several of the nation’s largest tech companies. Amazon and Alphabet are often in the crosshairs. Amazon is there because of its e-commerce dominance and its position in cloud computing. Alphabet is there because its Google division controls much of the U.S. ad market. There are logical ways to dismantle each company. (These 19 executives pay themselves more than $150 million a year.)

Amazon has two major divisions. The separation of these would be logical. The first is the massive e-commerce operation. In the most recent quarter, Amazon’s North America and international e-commerce operations had a combined revenue of $106 billion and an operating loss of $349 million. For years, it has taken market share from America’s retailers, both their online operations and bricks-and-mortar.

Amazon Web Services is arguably Amazon’s most successful business. The largest cloud computing operation in the world, it primarily competes with Microsoft and Google. It is growing rapidly. Its revenue in the most recent quarter rose 16% to $21.4 billion. Its operating income was $5.1 billion.

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The subsequent division would happen within e-commerce. Amazon Prime Video competes with Netflix, Disney, Hulu and other streaming services. Prime has over 200 million subscribers. That makes it slightly smaller than Netflix. Amazon does not break out its revenue. The service is often part of Amazon Prime, which Amazon offers to build its e-commerce business. Its spin-off would further weaken Amazon’s dominant position in the e-commerce market.

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The final part of Amazon that would need to be separated into pieces is its cash, cash equivalents and marketable securities hoard. The total of these is about $64 billion. There is no simple calculator for distributing this among the new, combined companies.

Each Amazon shareholder would get shares in the three new companies in a break-up. This would allow them to pick which of the three are winners and which are not.

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