Amazon CEO says Prime could become ‘standalone business,’ stands by layoffs

Amazon (AMZN) could potentially spin off its Prime streaming unit as a separate company, CEO Andy Jassy said Wednesday. During a wide-ranging interview at the The New York Times’ DealBook Summit , Jassy said that “overtime we have opportunities to make our Prime video business a standalone business that has very attractive economics.” Jassy also defended the Club holding’s decision to “streamline” costs by laying off thousands of employees , highlighted shifts in consumer spending amid an uncertain economy, and made clear Amazon’s intention to continue expanding into the health-care space. The Club welcomes Jassy’s comments on reining in costs, as well as its measured approach to building out Prime. Layoffs and expenses Jassy said Amazon’s recent decision to layoff roughly 10,000 workers is part of an effort to generate more efficiencies across the organization. But he said “it wasn’t wrong to double down” by hiring more employees when business was booming during the height of the Covid-19 pandemic. Jassy said he had no regrets about the company’s pandemic strategy, including the company’s push to build out its infrastructure to meet burgeoning demand. At the same time, he acknowledged that when adding headcount it’s important to consider any sudden changes that could arise, even when a business is performing well. Amazon, whose headcount ballooned during the pandemic, has seen growth slow as macroeconomic headwinds have mounted over the past year. Consumer trade down Growing economic uncertainty means consumers are more mindful about where they’re putting their cash and increasingly looking for deals, Jassy said. “People care a lot about getting a bargain right now.” He added that in discretionary categories like electronics, consumers are trading down to more economical models. “In difficult and uncertain economies, we found over time that consumers are very careful about who they choose to partner with, and they go with companies that are going to take good care of them and provide a great customer experience and that has always been something that we have focused very squarely on,” Jassy said. Streaming Amazon’s Prime Video, one of the fastest growing streaming services, could be a standalone business one day, Jassy said. The unit has been bolstered of late by its Thursday Night Football broadcast and new Lord of the Rings series. “Our Prime Video offering is an important ingredient…increasingly you see more and more people signing up to Prime because of the video content,” he explained. Jassy said Amazon will continue to invest in sports calling it a “unique” asset that drives Prime subscriptions. Amazon in healthcare Amazon is taking steps to build out its nascent pharmacy business, Jassy said, a move that enhances the company’s mission of being a one-stop-shop where customers can find any item they desire. “For a long time our customers wanted us to have a pharmacy offering and we’ve built something there [but] we’re still in the relative early days,” he said. At the same time, Jassy said the health-care system in the U.S. is in “dire need of being reinvented” and hopes Amazon can be a part of that reform. Amazon in July announced plans to acquire primary health-care provider One Medical in a deal valued at $3.9 billion . Bottom line It’s positive to see Jassy recognize that Amazon is overstaffed and overbuilt on infrastructure. The stock, which has declined more than 42% year-to-date, typically responds favorably in the harvesting phase rather than the investing phase, providing a glimmer of optimism for Amazon shares in 2023. Meanwhile, Jassy’s comments about consumers trying to stretch their dollars is not a surprise, given inflation has eaten into many U.S. discretionary budgets. Lastly, it makes sense that Amazon wants to build out Prime Video, and we’re pleased to hear they plan to do so in a disciplined manner. (Jim Cramer’s Charitable Trust is long AMZN . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.