FTC: Here’s How to Break Up Amazon

The Federal Trade Commission (FTC) has asked a federal court to force Amazon to sell off some of its assets. The government agency says Amazon has cornered the e-commerce market, at least as far as third-party retailers go. One retailer said, according to Reuters, “We have nowhere else to go and Amazon knows it.” It is not the first time America’s largest companies have been threatened with similar action. (These American companies have the worst reputations.)

Big companies have been broken up in the past. AT&T is the most recent example, in 1982. In 2000, the same thing nearly happened to Microsoft. Amazon could be the next company to which this happens.

Amazon has two major divisions, one of which feeds the other financially. The separation of these would be logical. The first is the massive e-commerce operation. In the most recent quarter, Amazon’s North American and international e-commerce operations had a combined revenue of $112 billion and an operating income of $2.2 billion. For years, it has taken market share from America’s retailers, both their online and brick-and-mortar operations. However, its margins remain tiny.

Amazon Web Services is arguably Amazon’s most successful business. The largest cloud computing operation in the world, it primarily competes with Microsoft and Google. It is growing rapidly. Its revenue in the most recent quarter rose 12% to $21.4 billion. Its operating income was $5.14 billion.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

The subsequent division would happen within e-commerce. Amazon Prime Video competes with Netflix, Disney, Hulu and other streaming services. Prime Video has over 200 million subscribers. That makes it slightly smaller than Netflix but larger than the others. Amazon does not break out its revenue. The service is offered as part of Amazon Prime, which is intended to build Amazon’s e-commerce business. The spin-off of video would further weaken Amazon’s dominant position in the e-commerce market.

The final part of Amazon that would need to be separated into pieces is its cash, cash equivalents and marketable securities hoard. The total of these is about $50 billion. There is no simple calculator for distributing this among the new companies.

In a breakup, each Amazon shareholder would get shares in the three new companies. This would allow them to pick which of the three are winners and which are not.

Sponsored: Tips for Investing

A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit.

Source: Read Full Article