Goldman Sachs assigned a “neutral” rating to Amazon (NASDAQ:AMZN) this week after previewing the fourth-quarter report due for release on January 31. Analyst concerns include European sales potential and the investments that Amazon will need to make into its services, notably including cloud storage. Amazon has released two new cloud storage products in as many weeks that expand the data backup and recovery options available to businesses.
Cloud storage – which has been prominent in the news lately as the industry assesses potential fallout from the shutdown of storage site Megaupload, whose operators have been accused of digital piracy — provides users with a third-party-facilitated online storage network that charges customers only for the space they use. This setup is designed to take potentially costly backup and storage responsibilities out of the hands of business owners, allowing them to focus more on data production than its upkeep.
Amazon has long been a leader in the cloud game, though many consumers weren’t aware of the service until Amazon presented them with an offer unlimited, free storage upon purchase of a Kindle Fire tablet or a Kindle Touch eReader. Businesses, meanwhile, haven’t shown huge enthusiasm for the potential benefits of cloud storage. According to an InformationWeek survey, 55% of businesses have no desire to use cloud storage while 29% would consider it after doing more research.
Amazon hopes to attract hesitant businesses with the aptly named AWS Storage Gateway. The service, which launched this week as part of the Web Services division, provides an introduction to cloud storage using software installed on the business customer’s own computers. Business administrators are guided through the process of securely transferring corporate data to Amazon’s data centers. The security standards are designed to be strict enough to allow for the transfer of electronic medical records or other sensitive materials. Clients utilizing AWS are able to keep track of data uploaded to the cloud and can easily restore materials when needed.
The release of AWS came a week after the launch of DynamoDB, a structured cloud database service built on preexisting technology that has run portions of Amazon’s own website. It’s a more advanced model than AWS, allowing customers access to advanced analytics and a greater range of customization options, but it still offers a relatively simple interface. A business can, for example, easily adjust, or “dial,” the amount of space it needs to use. This can lower costs and allow storage capacity to be matched to the customer’s needs as sales and inventory sizes fluctuate. Customers also can customize the performance of the service, which charges lower fees for, say, slower processing speeds.
These cloud storage products are expansions of the Amazon brand rather than newly forged ideas. Confidence in the company has been fairly high, and investors didn’t noticeably react to the service releases. At this point, most of the attention is focused on the forthcoming earnings report. Amazon shares on Friday were trading up a little more than 2% over the Goldman Sachs price target of $190. The earnings report may impact shares temporarily, but with its robust offerings and the continued expansion of brand recognition, Amazon has little chance of bottoming out.
