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Amazon CEO Jeff Bezos will become executive chair of the massive online retailer in the third quarter and be replaced by his longtime lieutenant, AWS CEO Andy Jassy.
The bombshell announcement on Tuesday came as Amazon reported its fourth-quarter financials.
"When you look at our financial results, what you're actually seeing are the long-run cumulative results of invention," Bezos said in a statement. "Right now I see Amazon at its most inventive ever, making it an optimal time for this transition."
Amazon saw net sales jump 44% to $125.6 billion in the fourth quarter, powered by a busy holiday shopping season that drove more business online as customers avoided retailers amid the COVID-19 pandemic. Net income more than doubled to $7.2 billion, in contrast to $3.3 billion the quarter one year prior.
For the full year, Amazon logged $386.1 billion in net sales, a 38% increase over 2019's $280.5 billion total.
While sudden, Bezos' departure and Jassy's pending ascension to the CEO job have been the subject of some speculation for years. AWS is seen as a key driver of Amazon's profitability, with its higher-margin cloud services helping offset aggressive pricing by Amazon in its e-commerce business.
Last year, that speculation percolated ever higher following August's retirement announcement of Amazon's retail business chief, Jeff Wilke, a move that took one major successor possibility off the table.
AWS had a $46 billion revenue run rate in 2020, a rise of 29% year-over-year, Jassy said during the company's re:Invent conference in December. The division benefited greatly from the pandemic as enterprises worldwide scrambled to adopt work-from-home policies and associated technologies for collaboration, secure networking and other areas.
"So many of those enterprises have gone from talking to having a real plan," Jassy said during the conference. "When you look back at the history of the cloud, it will show that the pandemic accelerated adoption of the cloud by several years."
Jassy joined AWS in 1997 and AWS launched its first commercial services in 2006. Since then, he has built the division into a cloud computing powerhouse known for delivering a firehose of new services each year. He makes a logical choice for Bezos' successor, said R "Ray" Wang, founder and CEO of Constellation Research.
Holger MuellerVice president and principal analyst, Constellation Research
"The company is about hard work, doing impossible things, and ensuring the customers gets choice, value and innovation," Wang said. "Jassy deserves the job, and he's well earned it."
AWS' critical role in Amazon's expansion over the years likely played into the company's decision to name him CEO, said Holger Mueller, another analyst at Constellation Research. "This ensures that the new Amazon CEO does not break AWS by accident, such as if Bezos took a retail outsider," he said.
Bezos' many outside interests beyond Amazon include newspaper publishing and space exploration, so his departure isn't surprising, said Patrick Moorhead, founder and principal analyst at Moor Insights & Strategy.
"The timing was abrupt, but I suppose you don't ease people into these things," Moorhead said. "Andy Jassy was the perfect and only replacement for Bezos, given his clear success with AWS."
Meanwhile, there are some likely candidates to succeed Jassy as head of AWS, Mueller added. These include Peter DeSantis, senior vice president of AWS global infrastructure and customer support, who has worked closely with Jassy for well over a decade.
Another possibility is Matt Garman, vice president of AWS sales and marketing. "Garman is the youngest and has seen the most expansion in responsibilities in the last two to three years, so I'd guess if it's an insider, it is him," Mueller said. Amazon declined to comment on possibilities for Jassy's successor.
Meanwhile, one longtime retail industry observer said he believes the move to appoint Jassy might signal a shift to place even more emphasis on AWS.
"In some way, the move may indicate where Amazon thinks it can make the most money moving forward," said Guy Courtin, head of global alliances at fulfillment software vendor 6 River Systems. "The fulfillment business looks like it is doing pretty well, but it is AWS that carries more of its fair share."
With the government looking closely at how Amazon and other large high-tech companies use their dominant market positions, Courtin speculated that maybe the move is intended to soften the company's image and deflect the government's investigation.
"If Amazon is worried the government is closing in and wants them to spin off AWS and other parts of the business, this could be a move to preempt that," Courtin said. "Or it could be that Bezos wants to focus on his other toys like his space program. When you have as much money as he has, the sky is the limit as far as what you want to do next."
But few observers believe Bezos is ready to walk away completely from the company he started in his garage 26 years ago. They think his presence will still greatly influence the direction Amazon takes in any part of its business. It is more likely Bezos will follow the path both Microsoft's Bill Gates and Oracle's Larry Ellison took when they stepped down after long stints as CEOs of the companies they founded.
Editor-at-large Ed Scannell contributed to this report.
Chris Kanaracus is a news director overseeing coverage of Cloud/DevOps and storage topics. Previously, he worked for Constellation Research, the Americas' SAP Users' Group, and IDG as a reporter, editor and analyst. Chris also worked at several newspapers in the Northeast, beginning in 1998.