Amazon Web Services Accelerated M&A With Elemental to Win Deal of the Year

The undisputed worldwide leader in cloud-computing infrastructure, Amazon Web Services Inc. (AWS) began ramping up M&A in 2015 with the pivotal $500 million purchase of video technology company Elemental Technologies Inc., which closed in October. Owned by Amazon Inc. (Nasdaq: AMZN), AWS has already announced one deal in 2016 and is expected to continue acquiring.

Elemental develops software that enables companies to re-format video produced for traditional broadcast networks so that it can be distributed over the Internet on PCs, smartphones, tablets and TV. Based in Portland, Oregon, Elemental boasts more than 700 media companies as customers and provides the technology behind over-the-top TV (OTT) applications, including the BBC’s iPlayer, CNNGo, ESPN ScoreCenter, HBO GO, MSNBC Shift, Sky Go and Sky Now. Before its purchase by AWS, Elemental had raised about $44 million in venture capital funding from firms including General Catalyst Partners, Luminari Capital, Norwest Venture Partners, Steamboat Ventures, Telstra Ventures and Voyage Capital.

The acquisition brings together Elemental’s video technology with the AWS Cloud platform to provide media and entertainment companies with tools to scale video infrastructures more efficiently and more economically, as the media industry increasingly moves to Internet-based delivery. “Together, we’ll collaborate on deeper technology integrations and new infrastructure offerings so that media and entertainment companies can evolve their hybrid and cloud models as they continue to innovate their services for viewers,” says Andy Jassy, senior vice president of AWS.

Since Seattle, Washington-based Amazon launched AWS in 2006, it has become the leading cloud-computing infrastructure provider in the world, with more than one million customers globally using the services to scale applications and lower infornation technology costs. AWS is comprised of a broad set of computing, storage, database, analytics, application, and deployment services from data center located in the U.S., Australia, Brazil, China, Germany, Ireland, Japan, and Singapore.

While Amazon grew significantly in 2015, the company’s fourth-quarter earnings disappointed analysts, who had expected even more growth. An exception was AWS, which delivered financial performance that exceeded expectations. The unit’s sales rose $2.41 billion in the quarter, up nearly 70 percent from the previous year’s fourth-quarter sales of $1.42 billion.

In the past, Amazon has grown organically or made small acquisitions. The $970 million purchase of Twitch Interactive Inc., an online community of video gamers, in 2014 was a departure from the company’s usual M&A strategy and represents its biggest deal to date. AWS, however, is likely to continue buying. In February, the unit agreed to buy Asti, Italy-based Nice, which develops software and services for high-performance and technical computing. Cloud computing, which has revolutionized information technology, will continue to drive many middle-market deals.

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