Over the past decade, few companies have been as aggressive in acquisitions as Amazon.com (AMZN), and it looks like the company could be gearing up to go on another buying spree.
Since 1998, Amazon has acquired or invested in more than 70 companies. While some of the acquisitions, such as the Zappos.com purchase in 2009 are done with revenue in mind, some others, such as the $775 million purchase of Kiva Systems earlier this year, are done solely with the intention of improving the company’s core business operations.
With borrowing costs at record lows, Amazon is looking to issue a sizable amount of debt, and if it does we can most likely expect to see another major acquisition in the not-too-distant future.
The company announced plans to issue around $500 million in debt, but bankers close to the sale have suggested that the final amount could wind up being in excess of $2 billion.
The company already has a huge stockpile of cash, at around $5 billion, and carries little debt, so taking on an additional $2 billion can really only mean one thing… it has its eyes on something.
Of course, it could also be looking to borrow money simply because it is so cheap to do so in today’s world, and use that cash to continue investing in its ongoing operations. The company has been making big investments in its lineup of Kindle tablets, and has been investing in new warehouses and data centers.
This raises the question of why are other big companies not following suit? It appears to be almost the perfect time for companies to take on additional debt and try to build their operations while the economy remains a bit weak.
Some companies are probably a bit weary of assuming large amounts of debt considering the uncertainty surrounding the economy, but smart companies like Amazon know that the best time to expand their business is when the economy is less than perfect and borrowing costs are at all-time lows.
Amazon is smart to consider expanding at this time, and companies that are trying to wait out the economic recovery before making big moves are probably going to be left wishing they had assumed the debt when it was cheaper to borrow.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors.
s as cheap as it is today.