Technology Focus: Amazon’s Bezos Disrupts Again, Devises Apple Challenge

  @DavidZie on September 09 2012 10:17 AM

Chances are there are few personalities as creative, disruptive and rich in the technology sector as Jeff Bezos, the founding CEO of Amazon.com Inc. (Nasdaq: AMZN), the No. 1 e-retailer.

Not only has the 48-year-old native New Mexican with an electrical engineering degree from Princeton humbled the entire bookselling industry, he's instilled fear among the national sellers of electronics like Best Buy Inc. (NYSE: BBY), helped put Circuit City out of business and now challenges general retailers like Macy's Inc. (NYSE: M) by selling clothes and home furnishings.

To support the operations of his Seattle-based enterprise, Bezos has constructed a global network of server farms and offers cloud services to medium-sized enterprises that don't want to hire International Business Machines Corp. (NYSE: IBM) and Hewlett-Packard Co. (NYSE: HPQ).

Revenue from Amazon Web Services is rising 63 percent annually. In the first six months of 2012, that sector alone brought in $974 million, or 4 percent of overall revenue.

Not satisfied with hammering mom-and-pop bookstores and putting Borders Books out of business, Bezos devised the e-book, the Kindle, in 2007, which prompted rival Barnes & Noble (NYSE: BKS) to devise the Nook, whose next-generation product will be partly financed by Microsoft (Nasdaq: MSFT), the world's biggest software company.

Tens of millions of Kindles have been sold. For the past 10 months, Amazon's Kindle Fire tablet has sold at least 7 million units, all priced far below the $499 cost of the iPad from Apple (Nasdaq: AAPL), the world's most valuable company. Bezos has stocked his Amazon Prime service with more than 22 million titles, including books, music, movies and TV shows, all priced below Apple.

Last week, Bezos showed off next-generation Kindles, including the Paperwhite, which has a crisper display for $119, and plain Kindle for $79, as well as Kindle Fire HD tablets priced from $199 to $499 for the biggest and best with 4G LTE connectivity and storage.

Shrewdly, Bezos proclaimed, We are not building the best tablet at a certain price. We are building the best tablet at any price.

Democratizing the tablet experience for consumers is going to dramatically bolster the market for consumers who can't afford Apple's high prices. That's a reason why competitors like Microsoft have announced plans to sell the Surface and Google has been selling the $200 Nexus for several weeks.

Similarly, Apple may devise a smaller version of the iPad or trim the price at its next product upgrade.

Amazon doesn't sell a smartphone yet, but Bezos himself holds a patent for one. There may not be as much opportunity in selling phones, especially in a market where even old stars like BlackBerry developer Research in Motion (Nasdaq: RIMM) and Finland's Nokia Oyj (NYSE: NOK) are getting clobbered.

Like Apple, Amazon doesn't manufacture anything, being totally reliant on Asian electronics makers like Taiwan's Quanta Computer (Taipei: 2382). That could set the company up as target for exploiting slave labor in China, as has happened to Apple and Samsung Electronics (Seoul: 005930).

As a non-union company, Bezos has already encountered criticism from labor groups for working conditions at some of its U.S. fulfillment centers that are at the heart of his supply chain. As well, privacy advocates have questioned Amazon's use of software analytics in its suggestions function that offers customers other options when they purchase one item and it pulls up another.

Clearly Bezos has been a master of what Harvard Business School professor Clay Christensen terms disruptive innovation.­­­

The innovators, Christensen says, find space at points at the bottom of the market for new disruptive technologies to emerge.

Chances are, Bezos continues to target those spaces.

This combination of Abner Doubleday, Sam Walton and Steve Jobs also has made himself fabulously rich. Shares of Amazon set an all-time high Friday of $259.42, valuing the entire company at $116.96 billion. Bezos's 19.6 percent share is worth about $23 billion.

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