Jeff Bezos stepping down was likely 'years in the making': Loop Capital's Chukumba

Yahoo Finance’s Brian Sozzi, Julie Hyman, and Myles Udland discuss Amazon CEO Jeff Bezos stepping down and the company’s latest quarter with Anthony Chukumba, Loop Capital Managing Director.

Video Transcript

JULIE HYMAN: Let's bring in someone else who knows a lot about Amazon right now. That is Anthony Chukumba. He is Loop Capital Managing Director. Anthony, it is great to have you here this morning to get your perspective on this story.

One of the things that's been discussed with Bezos's stepping out of that day to day role is that he will not as much have to deal with the headache of pending regulation for Amazon. Some of those regulatory threats. From the Department of Justice, from the FTC, from the EU. How much do you think that plays into the decision, and how is Jassy going to do in that role?

ANTHONY CHUKUMBA: So I don't think that that probably made much of a difference to Bezos, quite frankly. I mean, there's-- you know, I'm not sure if there's ever gonna be any sort of optimal timing to leave one of the largest and most successful and most widely covered companies in the world, but I highly doubt that that was part of the decision.

I think that this was, you know, like you said, probably years in the making. In terms of, you know, how Andy's gonna handle it, I think it's gonna be very similar to the way that Jeff handled it. I mean, I think that, you know, Amazon, at the end of the day, they feel that they are dotting all the I's and crossing all the T's.

And, quite frankly, you know, in the worst case scenario, if the FTC, if the EU were to break up Amazon and, let's say, make them spin off AWS, that'd probably be a good thing. Because I think that AWS would probably be valued a lot higher as a separate publicly traded company than it is as a part of Amazon.

BRIAN SOZZI: Anthony, what have you been your interactions with Andy Jassy through the years? What do you know about him? How might he lead the company differently than Jeff Bezos?

ANTHONY CHUKUMBA: Yeah, it's a great question. Well, funny story, I actually was in the same section as Andy at Harvard Business School. So our first year at Harvard Business School we took all of our classes together for that entire first year. We socialized together as a section. Even played intramural sport together as a section.

So I know him-- you know, I know him a little bit. You know, look, he joined Amazon right out of business school. And the funny thing was, you know, I thought I was master of the universe. I was going to work on Wall Street and move to New York, he was gonna go work for this weird company I'd never heard of that sold books.

Clearly he made, you know, the right decision. And one of his early roles was as a technical analyst to Jeff Bezos, so he was working with Jeff pretty much every single day. He then, you know, was-- essentially invented cloud computing along with Jeff, and he's been running that business very successfully for many years.

As you said, it's a small part of Amazon in terms of revenues, but it's the dominant part of Amazon in terms of profitability. And so, you know, I always assumed that when this day came that Andy would take over.

MYLES UDLAND: You know, Anthony, talking about that AWS part of the business, you put in your note that bears are likely to highlight that it has grown at a slower rate than what we're seeing at Google Cloud, just with their results out yesterday with the Azure business.

How are you thinking about those competitive pressures there for the AWS business specifically? Which, as you just outlined, might be worth more were it not part of, you know, Amazon proper.

ANTHONY CHUKUMBA: Well, we have to kind of put this in perspective. I mean, AWS grew 28% last quarter. Now, that was slower than Microsoft and Google. But with Google, they're losing money, right? So, you know, where AWS is making a ton of money. With Microsoft, It's a little squishy in what they-- in terms of what they call cloud. I'm not sure some of it's really cloud the way we think of cloud.

The other thing that I would mention is that, you know, AWS is growing at a slower rate, but off of a much larger base. I mean, that business now on an annual run rate business-- on an annual run rate bases, is in over $50 billion business. So I'm not really concerned about, you know, sort of Microsoft and Google nipping at AWS's heels, quite frankly.

JULIE HYMAN: Anthony, I want to come back to that idea of a potential split off, if the company was-- hand was forced. Because I think that's a really intriguing idea. Do you think that their hand would need to be forced? I mean, is this something under an Andy Jassy that is more likely? That is, a spin off of AWS.

And what would that look like? What would that mean for Amazon? What would the valuation of it be?

ANTHONY CHUKUMBA: I'm not sure if it's necessarily more likely or less likely. I mean, obviously, yeah, he's been running that business for quite some time and is very familiar with that business, but I'm not sure if that's going to be sort of the determining factor. I think that, you know, if Amazon had their druthers they would keep those businesses together.

So I don't necessarily think this is something that they'll do, you know, prophylactically. I think this will have to be something that they'll be forced by the government to do. In terms of the valuation, you know, we haven't quite done the math yet. You know, so I'm a little bit loathe to give a precise answer on that.

But I-- you know, it's going to be a big number. It's going to be a very, very big number. And, like I said, I'm quite sure that the implied value of AWS as part of Amazon is not reflected in the stock price-- is not fully reflected.

BRIAN SOZZI: Anthony, as a as a former analyst myself, I applauded you when you dropped coverage of GameStop a couple weeks ago. I mean, clearly that was the right move. But now, as the volatility has subsided, are you going to relaunch coverage, and what are your thoughts on it now?

ANTHONY CHUKUMBA: Absolutely not. Absolutely not. GameStop has been a debacle of epic proportions. I was just reading that, you know, Netflix and a couple of other Hollywood studios are going to make a movie about GameStop. I'm hoping that I'm included in that movie and played by Denzel. But, anyway, neither here nor there.

I mean, look. The valuation completely disconnected from the fundamentals. And a bunch of individual investors got hurt. Now, hedge funds got hurt too, but at the end of the day I'm not too worried about, you know, these hedge fund guys. You know, they're not sort of mortgaging their futures on whether GameStop works or not. Individual investors are.

And here's the scary thing, OK? GameStop hit a high of, I believe, over $480. Now it's down to a little less than 100. You know, last we checked that stock's worth maybe $10 a share. So there is still a lot of downside to go. AnI-- I you know, and I'm thinking my lucky stars I made that decision.

JULIE HYMAN: Well, thank you very much, Denzel-- I mean, Anthony Chukumba, this morning. Loop Capital Managing Director. Appreciate your time this morning on what is a busy one, I know. Thank you.