Amazon could buy a company like Slack or Zoom to replace its own unpopular chat app Chime and get in on the flood of coronavirus-related customers, analysts say
- Amazon's video conferencing and chat app Chime seems to be missing out on the surge of users flocking to Zoom and Slack amid the coronavirus crisis.
- The cloud wars aren't just about cloud infrastructure. One analyst believes that software helped Microsoft win a $10 billion Pentagon cloud contract over Amazon Web Services.
- Analysts say Amazon could turn to acquisitions to bolster its efforts in the collaboration space.
- Buying something "turn-key" like Zoom or Slack would help Amazon do that while focusing on infrastructure, but smaller acquisitions are more likely.
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As the coronavirus crisis forces people to stay home, video conferencing and chat apps like Zoom, Slack, and Microsoft Teams are seeing a surge of users.
One company that appears to be missing out: Amazon.
Amazon has its own online meeting, video conferencing, and chat app called Chime. While Chime's market share is unclear, it certainly doesn't have as much name recognition as Zoom or Slack and doesn't seem to be used as often, at least anecdotally. That's why analysts say that an acquisition could help bolster Amazon's effort in the collaboration space.
"I cannot recall attending a Chime meeting that wasn't related to or hosted by Amazon," Futurum Research analyst Daniel Newman said. "Wouldn't AWS be interested in something so turn-key as Zoom or Slack? Putting them together would be pretty powerful."
Buying Zoom or Slack would help AWS stay focused
Part of the reason AWS has been so successful in the cloud market, Newman said, is that the company has focused on building out core cloud infrastructure instead of software.
"AWS dominates at the core," he said. "It's the undisputed heavyweight in [cloud infrastructure], but as you move up the stack to [platforms] and [software], other companies become more compelling."
Microsoft, he said, dominates in software, such as the Microsoft 365 suite of business applications. While Amazon's cloud infrastructure is strong, the cloud wars aren't all about infrastructure.
Atherton Technology Research analyst Jeb Su Su believes that one reason Microsoft won the $10 billion Pentagon cloud computing contract, JEDI, was because of its strength in its office applications, in addition to its cloud. (Amazon is challenging the decision, alleging political intervention - and the Pentagon recently said it "wishes to reconsider" the decision in response to Amazon's lawsuit).
The current moment is highlighting Microsoft's strengths here. At the end of March, the company said that Teams had seen a "very significant spike," including a 775% surge in one area of Italy that had implemented a lockdown, although the surge has caused capacity issues for Microsoft's cloud.
Amazon Web Services, meanwhile, has yet to respond to a request about Chime usage during the coronavirus crisis.
"AWS over the years has flirted with the idea of going up the stack," Newman said. "They've built platforms, but when it comes to [software], they've been nondescript."
Acquiring a company like Slack or Zoom would allow Amazon to immediately add millions of users while staying focused on what it does best: infrastructure.
Smaller acquisitions are more likely
While Amazon Web Services is likely considering acquisitions in the collaboration space and Zoom and Slack are the hottest tools right now, Atherton's Jeb Su said, he thinks AWS is unlikely to buy those companies outright
"The Salesforces of the world, the ServiceNows, even companies like Zoom - these are not the companies we think AWS will be interested in," Su said. While his firm believes AWS is thinking about cloud applications, it's "not in [Amazon's] DNA" to make that kind of huge, costly acquisition of an established company.
AWS several isn't typically as acquisitive as Microsoft or Google. Microsoft spent more than $9 billion during its last fiscal year on acquisitions and Google Cloud Platform is explicitly looking to acquisitions to catch up to AWS and Microsoft in the cloud space. Both have opened the purse strings for major purchases, in the last few years: Google recently bought Looker for more than $2 billion and Microsoft dropped $7.5 billion on GitHub in 2018. For comparison, Amazon's biggest cloud-related acquisition appears to be Annapurna Labs for $370 million way back in 2015.
For Amazon, smaller companies are likely more attractive and this is a particularly ripe time to buy, Su said.
"The crisis opens a lot of opportunities because now it's getting cheaper," Su said. "That's where we can see them enter the cloud apps market."
Newman, the Futurum Research analyst, said if AWS "decides to get on the M&A bandwagon," it could adopt the same approach as Apple, Microsoft or Cisco, which is to make "a flurry or really interesting small acquisitions."
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