Amazon Weighs Changes at Alexa and Other Unprofitable Businesses

From a Wall Street Journal story by Dana Mattioli, Sebastian Herrera, and Jessica Toonkel headlined “Amazon, in Broad Cost-Cutting Review, Weighs Changes at Alexa and Other Unprofitable Units”:

Amazon.com Inc. Chief Executive Andy Jassy is leading a cost-cutting review of the tech giant and paring back on businesses at the company that haven’t been profitable.

As part of the monthslong cost-cutting review, Amazon’s leadership is closely evaluating its Alexa business, according to some of the people. The business has more than 10,000 employees and is a major recipient of investment capital, some of the people said. Internal documents viewed by The Wall Street Journal show that in some recent years Amazon’s devices unit, which includes Alexa, had an operating loss of more than $5 billion a year.

Amazon is currently considering whether it should focus on trying to add new capabilities to Alexa, a voice assistant available on a variety of Amazon devices. Adding capabilities would require greater investment, and many customers use Alexa for only a few functions.

Amazon also has told employees in certain other unprofitable divisions to look for jobs elsewhere in the company because the teams they were working on were being suspended or closed.

“Our senior leadership team regularly reviews our investment outlook and financial performance, including as part of our annual operating plan review,” an Amazon spokesman said. “As part of this year’s review, we’re of course taking into account the current macro-environment and considering opportunities to optimize costs.”

The spokesman said Amazon is “as optimistic about Alexa’s future today as we’ve ever been, and it remains an important business and area of investment for Amazon.”

Amazon’s shares rose by more than 4% on Thursday immediately after The Wall Street Journal published news about the cost-cutting review. The stock was up by more than 13% around midday as the market rallied, after data showed that inflation eased in October.

The Seattle-based company, whose stock is down about 43% year to date, has been experiencing a slowdown in its core retail business as it tries to manage costs from its logistics network. Other technology companies have been making cuts to better navigate a potential recessionary environment. This week, Facebook parent Meta Platforms Inc. said it would cut more than 11,000 workers, or 13% of staff.

Efforts to scrutinize expenses across a sprawling array of businesses have become common at the world’s largest technology companies. Alphabet Inc.’s Google has slowed the pace of hiring and scaled back support for a startup incubator, and Chief Executive Sundar Pichai has voiced concerns this year about employee productivity.

At Amazon, the approach is a contrast to the company’s tremendous expansion during the pandemic. Between the end of 2019 and end of 2021, Amazon hired more than 800,000 employees, mostly at its hundreds of warehouses, as it sought to keep up with a surge in online orders. During that period, it also struck deals worth more than $10 billion combined on acquisitions of a robot device-maker, a movie-and-television studio and a primary-care healthcare company. The retailer is continuing to invest in parts of the business where it sees growth potential, such as healthcare.

The company has determined that there are some areas where certain roles are no longer necessary and has worked in those cases to help staff members find new roles.

The review reflects Mr. Jassy’s intense interest in reducing expenses and focus on profits in recent months, some of the people said. Amazon has lost $3 billion this year after posting net income of about $33 billion in 2021 and $21 billion in 2020. Last month, Jeff Bezos, the Amazon founder who remains the company’s chairman, joined other business leaders in warning about economic uncertainty. “The probabilities in this economy tell you to batten down the hatches,” he tweeted.

Mr. Jassy was CEO of Amazon Web Services, the company’s cloud-computing arm, before taking over as Amazon CEO in July 2021. Mr. Bezos, in his final years as Amazon CEO, spent much of his time working on Amazon’s most ambitious projects, and Alexa was one of his pet projects. He continued to fund Alexa even though it was unprofitable, people familiar with the matter said.

The Amazon spokesman said that customer interactions with Alexa in the past year have increased by more than 30%. He said that while features like playing music are popular, customers also regularly use Alexa for other services such as controlling their smart homes and shopping and that the company continues to invest in introducing new Alexa experiences.

Amazon has moved to redeploy employees from certain teams to more profitable areas and closed a variety of teams in areas such as robotics and retail, according to some of the people.

Amazon last underwent an extensive profitability push in 2017 under Mr. Bezos. Senior Amazon executives say Mr. Jassy’s review is much more extensive. Mr. Jassy has been laser-focused on profits since taking over last year, and has presided over tough decisions.

Amazon abruptly shut many of its physical stores aside from grocery, including bookshops and specialty stores, even though as late as December the unit had a growth plan to nearly double its store footprint, according to people familiar with the plans. In August, Amazon announced that it was closing its telehealth unit Amazon Care.

Last week, Amazon announced that it was instituting a hiring freeze across corporate jobs.

In a note to employees about the hiring freeze, Amazon executive Beth Galetti wrote, “In general, depending on the business or area of the company, we will hire backfills to replace employees who move on to new opportunities, and there are some targeted places where we will continue to hire people incrementally.”

Mr. Jassy became CEO of Amazon just as a change in consumer behavior began to affect Amazon’s retail side of the business. Amazon enjoyed unprecedented growth during the pandemic, and healthy revenue and earnings growth for years before it. But for much of Mr. Jassy’s tenure, he has dealt with slowing growth.

Amazon’s cost-cutting focus has stretched across the sprawling company, including in its logistics arm responsible for delivering its packages. The company in recent months has put an added emphasis on finding ways to save money at its warehouses, people familiar with the matter said. Amazon employees in charge of planning, for example, have been told to find extra room on delivery trucks when possible.

The attention to certain details is a contrast from the height of the pandemic, the people said. During those days, staff were told to move as quickly as possible to expand services and get packages to customers, without as much focus on costs.

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