Jeff Bezos, the founder and CEO of Amazon (AMZN +2.33%), is arguably the most influential business leader of his era. Bezos has famously brought Amazon from a scrappy start-up selling books online to a global tech behemoth with dominant positions in e-commerce and cloud computing, with a track record of invention that may be unrivaled in the tech world.
The company announced Bezos' upcoming change of position away from CEO and into executive chairman in its fourth-quarter earnings report Tuesday after the bell, stunning the business world. At 57, Bezos is still far from retirement age, and there had been no sign he would step down from the CEO job.
But perhaps more surprising than his decision to move on was investors' reaction to the news. Ordinarily, when a much-admired chief passes on the reins, the stock flops, especially when it's a surprise, but Amazon stock was actually trading higher in the after-hours session, closing up 0.3%. The quarterly report included a huge earnings beat, but the Bezos news clearly overshadows any round of quarterly results.
Let's dig in a little deeper to see what this news means for the company.
Jeff Bezos. Image source: Amazon.
Bezos says bye-bye
Bezos isn't leaving entirely. In the third quarter, he'll transition to executive chairman, and Andy Jassy, the current CEO of Amazon Web Services, will take over the top spot. In a letter to employees, Bezos said:
Being the CEO of Amazon is a deep responsibility, and it's consuming. When you have a responsibility like that, it's hard to put attention on anything else. As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions. I've never had more energy, and this isn't about retiring. I'm super passionate about the impact I think these organizations can have.
Bezos has previously explained his decision to start Amazon as part of a process he called Regret Minimization Framework. He knew that even if Amazon failed, he wouldn't regret the decision when he was 80, but he would regret not trying.
I suspect Bezos is thinking similarly about moving on from the company he founded. He only has so many working years left in his career, and has other interests he wants to devote his time to, including spaceflight company Blue Origin and The Washington Post, two other businesses he owns.
Amazon is one of the most valuable companies in the world; it just capped off a year with nearly $400 billion in revenue, and it's much more profitable than what anyone would have imagined just a few years ago. In many ways, it makes sense that Bezos is ready to move on.
What it means for investors
CEO transitions, especially when they're among the most successful leaders in business, don't always go smoothly. General Electric stock flailed after Jack Welch left, as did Microsoft stock following Bill Gates' departure, and Starbucks stock after Howard Schultz quit the first time. In fact, Starbucks was so poorly managed that Schultz returned to successfully rescue the brand before stepping down again in 2017.
Bezos leaves Amazon with a unique culture formed in his image, one that values invention and hard work, and puts the Day 1 mentality first, meaning the company still operates with the spirit of a start-up even though it's one of the biggest companies in the world.
He also gave a full-throated endorsement to Jassy, saying: "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."
A number of news outlets have also reported that the transition has been in the works for some time, with Bezos focusing on higher-level projects both inside and outside of Amazon for a while.
He leaves the company in outstanding shape, but his departure will be the biggest test yet of the culture he's built at Amazon. The tech giant enjoys a wealth of competitive advantages such as the Prime loyalty program and its reputation for customer satisfaction, which should drive the company's growth over the coming years.
But the tech industry changes fast, and Amazon faces an ever-shifting array of competitors. There's little reason to worry about the stock for now, but keep an eye on Jassy's tone and his first moves when he takes over this summer. While he's well prepared, Bezos' record clearly sets the bar high.
