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Instant Analysis: Amazon.com Acquires NICE

By Evan Niu, CFA - Feb 12, 2016 at 2:20PM

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The tech titan scoops up a small Italy-based software company to beef up Amazon Web Services even further.

What happened?
E-commerce giant Amazon.com (AMZN -3.92%) has acquired NICE, a small company based in Italy, to be part of its growing Amazon Web Services business. NICE offers software and services for high-performance and technical computing that allow customers to optimize and centralize computing tasks that require a lot of performance. NICE also facilitates data visualization and supports mobile devices.

Amazon did not disclose financial terms, but said it expects the deal to close in the first quarter. Existing customers will not see any interruptions in service, and NICE will soon integrate with AWS.

Does it matter?
AWS continues to be an incredibly important business for Amazon. The cloud-computing segment has become so important that Amazon now discloses financial results for AWS. The company continues to expand its cloud-based offerings and remains the market leader by a large margin, so it makes plenty of sense to strengthen AWS through targeted acquisitions when appropriate.

For instance, AWS generated nearly $1.9 billion in operating income throughout 2015, for a 24% operating margin. That's meaningfully higher than the 4% operating margin that Amazon's core North American e-commerce business generates. Naturally, Amazon promptly reinvests those profits back into the business for future growth, so the contribution from AWS is extremely important to future results.

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