Jeff Bezos, founder and CEO of Amazon (NASDAQ: AMZN), is arguably the most influential business leader of his time. Bezos became famous for bringing Amazon from a startup that sells books online to a global technology giant with dominant positions in e-commerce and cloud computing, with a history of invention that can be unmatched in the technology world.
The company announced Bezos’ next move from CEO to CEO in its fourth quarter earnings report on Tuesday after the bell, stunning the business world. At 57, Bezos is still far from retirement age and there was no sign that he would resign as CEO.
But perhaps more surprising than his decision to move on was investors’ reaction to the news. Typically, when a highly admired boss passes the reins, stocks fail, especially when it comes as a surprise, but Amazon’s shares were actually trading high in the after-hours session, closing up 0.3%. The quarterly report included a huge drop in earnings, but Bezos’ news clearly overshadowed any quarterly earnings round.
Let’s go a little deeper to see what this news means for the company.
Jeff Bezos. Image source: Amazon.
Bezos saying goodbye
Bezos is not going away entirely. In the third quarter, he will transition to CEO, and Andy Jassy, the current CEO of Amazon Web Services, will take first place. In a letter to officials, Bezos said:
Being the CEO of Amazon is a deep and exhausting responsibility. When you have a responsibility like that, it’s hard to pay attention to anything else. As Executive Chairman, I will continue to be involved in important initiatives in the Amazon, but I will also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions. I’ve never had more energy and it’s not about retiring. I am very excited about the impact that I think these organizations can have.
Bezos previously explained his decision to start Amazon as part of a process he called the Regret Minimization Framework. He knew that even if Amazon failed, he wouldn’t regret the decision at age 80, but he would regret not having tried.
I suspect that Bezos is thinking the same way about leaving the company he founded. He only has so many years of work left in his career and has other interests to which he wants to dedicate his time, including space flight company Blue Origin and The Washington Post, two other companies it owns.
Amazon is one of the most valuable companies in the world; it just ended a year with almost $ 400 billion in revenue and is far more profitable than anyone would have imagined just a few years ago. In many ways, it makes sense that Bezos is ready to move on.
What does this mean for investors
CEO transitions, especially when they are among the most successful business leaders, do not always go smoothly. General electrical the stock fell after Jack Welch left, as well as Microsoft stock after Bill Gates left, and Starbucks shares after Howard Schultz left for the first time. In fact, Starbucks was so poorly managed that Schultz returned to successfully rescue the brand before stepping down again in 2017.
Bezos leaves Amazon with a unique culture formed in its image, which values invention and hard work, and puts the mentality of Day 1 first, which means that the company still operates in the spirit of a start-up, although it is one of the largest companies in the world.
He also gave a vehement endorsement to Jassy, saying, “Andy is well known within the company and has been with Amazon for almost as long as I have. He will be an exceptional leader and has all my confidence.”
Several news outlets have also reported that the transition has been underway for some time, with Bezos focusing on high-profile projects on and off Amazon for a while.
He leaves the company in excellent shape, but his departure will be the biggest test of the culture he built on Amazon. The technology giant enjoys numerous competitive advantages, such as the Prime loyalty program and its reputation for customer satisfaction, which should drive the company’s growth in the coming years.
But the technology industry is changing rapidly, and Amazon faces an ever-changing array of competitors. There is little reason to worry about the stock for now, but keep an eye out for Jassy’s tone and first moves when he takes over this summer. Although he is well prepared, Bezos’ record clearly sets the bar.