Amazon.com, Inc. (NASDAQ:AMZN) is on somewhat of an acquisition tear. After buying smart camera and doorbell startup Blink in December, the company is making another big move. The newest target is Ring, another smart-home startup, known for its connected doorbell cameras.
The Amazon acquisition shows the company is moving aggressively on a number of strategies. And the outcome has implications for AMZN stock.
Amazon to Pay $1 Billion for Ring
Amazon has reached an agreement to buy Ring, a startup that is best known for making connected doorbells with integrated cameras. Ring confirmed the acquisition to CNBC, with an e-mailed statement:
“We’ll be able to achieve even more by partnering with an inventive, customer-centric company like Amazon. We look forward to being a part of the Amazon team as we work toward our vision for safer neighborhoods.”
Ring doorbells replace a standard doorbell with a version that features an integrated, Wi-Fi connected camera. With a Ring doorbell installed, owners can see who is at their door from anywhere, using an app on their smartphone. The company calls their product “caller ID for the front door.”
The doorbell camera can send a notification and video stream as soon as someone approaches the door, and features two-way voice interaction. Ring smart doorbells range in price from $179 to $499, with optional online video storage for an additional cost. And yes, Ring doorbells are Alexa-enabled.
The security implications of the device are obvious, and one of the big issues it helps to defend against is the problem of thieves making off with packages dropped at the front door by couriers — including deliveries from Amazon.
Three Reasons for Amazon’s Acquisition of Ring
Buying Ring makes sense for Amazon for three important reasons.
First, it provides yet another component of an Amazon-controlled smart home.
Along with Cloud Cams, Fire TVs and Echo smart speakers, now Amazon has a doorbell cam that lets users interact remotely with visitors. The more comprehensive an Amazon smart home can be, the more likely consumers are to buy into it instead of putting together a patchwork system from multiple vendors.
Second, from a home security perspective, Ring adds another key component that better positions Amazon to take on Alphabet Inc.’s (NASDAQ:GOOGL) Nest. Home security systems are on track to be a $47 billion industry by 2020.
Finally, last fall AMZN launched Amazon Key, a home delivery services for Prime members that has packages delivered inside a customer’s home — not left on the front porch.
The service includes an indoor camera and a smart lock. But Ring adds a doorbell cam to view the delivery before it gets inside and to track the delivery person’s departure. Amazon Key is a big weapon in the fight against other retailers like Walmart Inc (NYSE:WMT) that are moving to strengthen their online shopping capabilities.
Implications for AMZN Stock
Amazon tends to think long term with its strategic planning.
Buying Ring isn’t going to boost AMZN stock through sales of doorbells — even at up to $499 a pop.
But the Amazon acquisition offers the opportunity to further entrench the company’s presence in the home, gives it more expertise and technology to take on rivals like Nest in the home security market and offers a boost to its Amazon Key home delivery service.
All of these businesses are ones with big growth potential over the long term. They also touch on Amazon’s retail business in one way or another. So yes, the purchase of Ring is an important one to the company, but it’s part of a bigger strategy — and it probably won’t be the last such Amazon acquisition, as the company maneuvers to stay ahead of the competition.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.