Amazon's cloud chief targets "old guard" tech giants

Wed Nov 28, 2012 8:00pm EST
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By Alistair Barr

LAS VEGAS (Reuters) - Inc's cloud computing division is going after big corporate customers, a new focus that will put the fast-growing unit into direct competition with some of the world's largest technology companies.

Andy Jassy, head of Amazon Web Services or AWS, criticized the hefty profit margins of what he called "old guard" tech companies on Wednesday and unveiled a new data warehousing service that he said will cost about a tenth of existing solutions.

"The old world of technology has a pricing model which is to charge as much as customers can pay. Customers are tired of it," Jassy said, during AWS's first conference in Las Vegas, Nevada, where more than 6,000 people attended.

He is banking on the division to take direct aim at tech stalwarts Oracle Corp, International Business Machines Corp and Hewlett-Packard Co, among others.

Shares of Teradata Corp., a leading independent provider of data warehouse services, fell 3.7 percent to $59.27 on Wednesday on concern about competition from AWS.

"A new competitor is entering the space with significantly lower price points," said Derrick Wood, an analyst at Susquehanna Financial Group. "That's the essence of the concern."

AWS, which Amazon started more than six years ago, provides data storage, computing power and other technology services from remote locations, making it a pioneer in what is now known as cloud computing.

AWS has grown fast because its services are cheap, relatively easy to use and can be shut off or ramped up quickly, depending on companies' needs. Evercore analyst Ken Sena expects AWS revenue to jump 45 percent a year, from about $2 billion this year to $20 billion in 2018.   Continued...

Amazon Senior Vice President Andy Jassy speaks during a keynote speech at the Re:Invent conference in Las Vegas, Nevada November 28, 2012. REUTERS/Richard Brian