Amazon Sells Another Unexpected (And Shrewd) Acquisition

eCommerce and Cloud Computing Giant Amazon (NASDAQ: AMZN) He is no stranger to game-changing acquisitions.
The company this week signed a merger agreement for Roomba iRobot (NASDAQ: IRBT). The all-cash deal will cost Amazon $1.7 billion and add a whole new wrinkle to Amazon’s suite of assistive tech products for families. However, modern Roomba systems already work with Amazon’s Alexa platform, so integrating iRobot’s assets and technologies should be a breeze.
In fact, acquisitions are such an important part of Amazon’s business model that it’s easy to forget how these deals can change the rules of the game. Let me remind you of some highlights from the long and rich Amazon acquisition history. I’m sure you’ll come across many names along the way – and you may have forgotten that some of them weren’t actually Amazon brands from the start.

Whole Foods: An elephant with $13.7 billion a room

Amazon has owned Whole Foods grocery store chain since 2018. The $13.7 billion acquisition was the largest deal in veteran e-commerce history, adding 472 physical stores to Amazon’s previously all-digital sales model.

Physical stores made up a modest 3.6% of total Amazon sales last year. However, Whole Foods stores have other jobs in Amazon’s larger business machine — and the chain is evolving as we speak.
For example, stores act as centers for Amazon returns and pickup deliveries. Amazon introduced a no-checkout demo store model near its Seattle headquarters last year. This idea was also seen at Whole Foods in the area, just a few months later. Whole Foods is an important operation, although it has little impact on Amazon’s main sales.

Ring and Blink: $1.1 billion in home security force

Well, everyone already knows the Whole Foods deal. But did you know that the company bought video doorbell specialist from Ring and home security company Blink that same year?
These deals were much smaller than Whole Foods of course. Amazon has spent $1 billion on Ring and less than $100 million on Blink. However, these brands now form the core of Amazon’s home security catalog and are considered great sellers at every Prime Day sales event. Furthermore, the presence of a fully integrated Alexa security system has filled a glaring gap in Amazon’s line of smart home products. I would say this was a reasonable billion dollar investment.

Alexa: Reminds me of the old Possession

This is a fun one. The Alexa digital assistant platform that lies at the heart of Amazon’s personal tech business wasn’t an in-house invention. Amazon bought the Alexa Internet commercial for a song—the purchase price was too small to be revealed in the ad—in 1999.
At the time, Alexa was little more than a useful information-scraping add-on for the leading web browsers of the time. Now, Alexa is an advanced AI platform with cloud-based connections to all of your Amazon smart home and personal assistant devices — plus a growing suite of third-party tools. It’s fair to describe Alexa as the brains behind Amazon’s consumer tech business.

Given Alexa’s high prominence these days, it seems silly that the original deal was microscopic. Amazon actually announced it as a bulleted side note in a press release for the $645 purchase of used book market Exchange.com.
In 2022, Exchange.com fused into Amazon’s largest e-commerce platform, perhaps leaving some second-hand features behind but evaporating. Alexa was clearly the most important deal in this ad, given the benefit of 23 years of hindsight.

But wait there is more!

Amazon has acquired more than 100 companies so far and is in the process of closing several deals at the moment. The deal to buy One Medical, a subsidiary of the primary healthcare provider, for $3.9 billion 1 Live Healthcare (NASDAQ: one), comes to mind. Amazon is already making strides in the healthcare sector, and the 1Life deal will accelerate those ambitions.
Will iRobot join the ranks of unforgettable, game-changing Amazon deals? It remains to be seen, but the two companies work together like peanut butter and jelly. The Roomba brand is a well-established and very valuable part of the iRobot deal, and I expect Amazon to retain that name for future products in the home cleaning robotics market. Also, I think Alexa is about to learn some new tricks from iRobot’s highly polished robotic navigation software.
Once again, iRobot is a great fit for Amazon and Alexa-powered catalog of products, especially given the e-commerce expert’s deep history of successful purchases.
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John Mackie, CEO of Whole Foods Market, an Amazon company, is a member of The Motley Fool’s Board of Directors. Anders Billund holds positions at Amazon. Motley Fool has positions at Amazon and iRobot and recommends it. Motley Fool has a disclosure policy.

The opinions and opinions expressed here are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

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