What Favored Amazon.Com, Inc. (NASDAQ:AMZN) To Bag Elemental Technologies, Beating Suitors Like Cisco?


Amazon.com, Inc. (NASDAQ:AMZN) was able to trounce Cisco Systems, Inc. (NASDAQ:CSCO), Ericsson (ADR) (NASDAQ:ERIC) and others in the race to acquire Elemental Technologies. It is emerging that at least three factors played in favor of Amazon in the battle to purchase Elemental. One of those factors was that the owners of Elemental were willing to avoid an IPO, which they considered so unpredictable or so perilous given the recent adverse market movements. The other reason was that Amazon’s offer of about $500 million for Elemental was acceptable for the owners.

Amazon.com, Inc. (NASDAQ:AMZN) is bringing video-streaming technology provider Elemental Technologies under its wing. Already, Amazon has a video streaming service called Amazon Instant Video that it offers as part of the $99/year Prime subscription. While Elemental will clearly bolster Amazon’s video agenda, the acquisition is also expected to boost Amazon’s cloud offering – Amazon Web Services (AWS). Using video-streaming software from Elemental, video providers can create content that work across multiple platforms.

In coming to acquire Elemental, Amazon may have been lucky in a number of ways, enabling the company to beat rivals in the race to own the video technology provider.

Premium offer

Amazon’s offer to acquire Elemental for $500 million may have excited the owners of the company. Given that Elemental was valued at about $222.16 million at the beginning of this year, Amazon’s price of $500 million looked like a premium offer that the owners of Elemental couldn’t turn down.

Keeping Elemental in Portland

Amazon.com, Inc. (NASDAQ:AMZN) seemed more interested in the technology that Elemental has than where the company is based. As such, Amazon is willing to let Elemental retain its base in Portland and also to keep its name – Elemental Technologies. These apparent concessions by Amazon may have resonated well with the owners of Elemental.

Stress in IPO market

The IPO market doesn’t look healthy, and managements, boards and venture capitalists appear receptive to deals that can help them avoid the potentially perilous IPO route. The same feeling may have played a role in Elemental’s willingness to sell to Amazon.com, Inc. (NASDAQ:AMZN).

Elemental Technologies had revenue of $49 million in 2014 and was on track to register nearly 104% top-line growth to post revenue of $100 million in 2015.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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