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Will Jassy's Cloud View Take Amazon to the Next Level?

By Danny Vena, Brian Stoffel, and Jason Hall - Feb 18, 2021 at 7:00AM

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Investors are already invoking the name and success of Satya Nadella.

Word broke earlier this month that Amazon (AMZN 2.57%) CEO Jeff Bezos will relinquish his role, turning the reins over to Andy Jassy, chief of Amazon Web Services (AWS). Jassy's cloud computing experience has many investors drawing a parallel to Satya Nadella, who headed Microsoft's (MSFT 1.12%) cloud computing efforts before becoming the company's CEO. Nadella was credited with breathing new life into the tech behemoth. Will Jassy's ascent to the top chair at Amazon usher in a similar age of transformation?

On this clip from Motley Fool Live recorded on Feb. 3, "The Wrap" host Jason Hall and contributors Danny Vena and Brian Stoffel discuss Jassy's cloud focus and what it means for Amazon going forward.

Jason Hall: One of our frequent viewers yesterday put in the comment, comparing Jassy coming in to Satya Nadella taking over as CEO of Microsoft. Do you see the same thing happening here? Danny, what do you think?

Danny Vena: I think going forward, the fact that Jassy has been the CEO of Amazon Web Services and he is now taking the helm at Amazon, I think what you're going to see is his focus has always been on AWS. I think he probably has some big ideas about ways that AWS could further be used to enrich Amazon.

He's got that mindset. Coming from AWS, he's going to bring that perspective to the larger picture of how Amazon is run and we saw that happen with Satya Nadella and with Microsoft and how much Microsoft has benefited from that forward-looking perspective on cloud computing. I think that we're going to see more of the same thing with Amazon, but I'd love to hear what Brian thoughts are on this as well.

Brian Stoffel: Well, it's almost an unfair comparison, because Satya didn't come after Bill Gates left. He's after Steve Ballmer. The numbers are great. He didn't get the same fanfare that everybody else did.

Jason Hall: Ballmer, he gets blamed because he happened to take over when the stock was at the peak value and the company did well over his tenure.

Brian Stoffel: I think that there is some legitimate gripes about the changes that Nadella made should have been made earlier and there was a lot of money on acquisitions that was pretty much wasted.

That being said, what I think would be a healthier comparison would be to hope that it's someone that's more like a Tim Cook, or I can't even remember is name. This just shows how great Costco is. But when Jim Sinegal left, his successor has just carried on. As far as I'm concerned, there's really no difference.

The one thing that I'll say is that here's the thing. If you read the blog that we talked about earlier, Stratechery, which is run by a fellow Wisconsinite who lives in Indonesia, a fellow Wisconsinite, is that what made Amazon so interesting was that they had the everything store and that's the centerpiece.

But everything that made it profitable was a tool that was built for the everything store. That was perfected internally and then offered outside.

Here's what I mean, Amazon had to get really good at cloud computing for Amazon's everything store. They got so good at it that they then were able to say, let's take this thing that's almost like a side thing and let's offer it up and it's huge.

The same thing happened for fulfillment. The company built out all these fulfillment centers so that their everything store could sell everything. Now, they barely, not, barely, but compared to what it used to be proportionately, they barely sell anything that's Amazon branded.

It's the tools that you build for the everything store that end up paradoxically being the thing that creates value for shareholders. That's the one thing that I'd be a little bit worried about if they focus too much on the cloud is the way that that optionality happens is by building tools for the everything store. At least historically.

Jason Hall: That's good. It's important because the other thing with Nadella is, let's be honest, Microsoft wasn't struggling per se when Nadella brought in, it was still an enormously profitable. But it's still counted on some legacy businesses that we're losing relevance in importance as being really important parts of its business.

Nadella's ability to destroy all of those silos that prevented Microsoft from cannibalizing its legacy businesses. Because everybody's incentives were completely screwed up and weren't aligned with what was best for the business.

That's the most important thing I think that Nadella did, was he blew up all those silos. It unlocked all of the intellectual horsepower at Microsoft to make the Microsoft now that many say is the best run tech company in the world. It's a tough comparison.

Danny, I think you're spot on that his insight coming from AWS is going to be valuable. To Brian's point, that it's still going to be part of that virtuous cycle. That flywheel that's built around the everything store business.

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