In the midst of posting another blockbuster quarter, Amazon dropped the bombshell news that founder and CEO Jeff Bezos is stepping out of the top role as of the third quarter of 2021, to be replaced by Amazon Web Services head Andy Jassy.
Bezos, who started the company as a bookseller on the nascent internet in 1994 in Seattle, has grown it into one of the most dominant companies in the world with an eye-popping market cap of $1.6 trillion and $100 billion-plus in quarterly revenue. Beginning with its marketplace Amazon.com, it has expanded along the way to a major position in cloud services as well as apparel, groceries, healthcare, logistics and other domains.
As executive chairman Bezos will remain involved in the company’s direction while focusing on projects like the Blue Origin space company, duking it out with Elon Musk’s SpaceX in the heavens, and ownership of the Washington Post – whose editor Marin Baron is coincidentally stepping down after eight years.
“I’m excited to announce that this Q3 I’ll transition to Executive Chair of the Amazon Board and Andy Jassy will become CEO,” Bezos said in a letter to employees. “In the Exec Chair role, I intend to focus my energies and attention on new products and early initiatives. Andy is well known inside the company and has been at Amazon almost as long as I have. He will be an outstanding leader, and he has my full confidence.”
CNBC reported that speculation on Bezos’ successor had centered on Jassy and Jeff Wilke, Amazon’s CEO of its worldwide consumer business, but the company announced Wilke will retire this year. Some analysts have called out Jassy’s lack of experience in retail as an area of concern, a stronger suit for Wilke. Jassy, who joined the company in 1997, has run the profitable AWS division since its inception in 2006.
Jassy will inherit an Amazon facing possibly its first union shop in an Alabama fulfillment center in 2021, as it counters charges of working conditions by noting its above-scale pay and benefits, as well as ongoing antitrust challenges from governments here and abroad and the never-ending Godzilla vs. King Kong bout with Walmart.
In a clear sign of the intense scrutiny it’s under, Amazon was fined $61 million by the Federal Trade Commission on Tuesday to settle charges it failed to pay its Flex contractor drivers the full tips they were due from customers. Over two and a half years beginning in late 2016, the FTC alleges, Amazon put in place a lower hourly rate to make up the difference between what it was actually paying Flex drivers and what it promised, without properly disclosing the change.
“I will reiterate that Jeff is not leaving,” Amazon CFO Brian Olsavsky told analysts on an earnings call. “He is getting a new job. He will be involved in many large one-way-door issues, as we say, one-way doors meaning the more important decisions things like acquisitions, things like strategies, and going into grocery and other things. So, Jeff’s always been involved with that, and that’s where we’ll keep his time focused on.”
For the fourth quarter, Amazon redefined blowout in a peak season it owned. Net sales were up 44% to $125.6 billion, from $87.4 billion in 2019, while the Refinitiv estimate was “just” $119.7 billion. Net income more than doubled from $3.3 billion to $7.2 billion, and diluted EPS of $14.09 was nearly double the Refinitiv estimate of $7.23.
Brittain Ladd, Chief Supply Chain and Marketing Officer of Pulse Integration, said it’s exactly the fact that Jassy isn’t coming from the retail side that makes him the perfect pick to succeed Bezos.
“He’ll ask the why questions such as, why doesn’t Whole Foods sell more groceries? Why doesn’t Amazon control more market share in groceries?” said Ladd, who worked at Amazon on its grocery and micro-fulfillment strategy. “He’ll also ask the how questions, like, how does Amazon become the largest grocery retailer in the U.S.? And the what: What is our strategy to nullify Shopify? Why don’t we acquire them? What is our strategy for Instacart? Why don’t we acquire them?”
What’s needed more than anything at Amazon, Ladd said, was the willingness to disrupt itself.
“They need to thoroughly review every aspect of the business and ask, can we do better? Is this still strategic? Is it a good fit?” he said.
Juozas Kaziukenas, founder and CEO of Marketplace Pulse, said the biggest challenge for Jassy is to be seen not as someone Bezos left the company he built to run, but rather as someone who will continue to build it.
“Escaping the founder’s shadow is his number one task to keep innovation happening, to keep attracting talent and to discover what’s next for the company in decades to come,” Kaziukenas said. “Microsoft’s Satya Nadela did this really well, when Bill Gates stepped down as CEO in 2014.”