Sat, Sep 09, 2017 - Page 10 News List

Bidding opens for second Amazon HQ

DUAL BASES:The strategy could signal a split between its Web services and retail businesses, as it could cut regulatory risk and internal competition, an analyst said

Reuters

Construction continues on three glass domes as part of Amazon.com Inc’s campus expansion in Seattle on April 27. They are expected to open early next year.

Photo: AP

Amazon.com Inc on Thursday said it would build a US$5 billion second headquarters in North America, setting off a competition between cities and states to offer tax cuts and incentives that could bring 50,000 new jobs.

The largest e-commerce company said it intended to create “HQ2,” a headquarters that would be a “full equal” to its Seattle office, chief executive officer Jeff Bezos said in a statement.

The firm wants a metropolitan area of more than 1 million people with an international airport, good education and mass transit.

Amazon is likely to land its second headquarters in a cheaper city than Seattle and score subsidies. The company promised up to 50,000 jobs averaging more than US$100,000 in annual compensation over the next 10 to 15 years.

Cities and states immediately began saying they would bid.

Dallas, Houston, Toronto, St Louis, Kentucky, and Miami are a few that are committed to bid. Chicago Mayor Rahm Emanuel has made a case for his city in discussions with Bezos, a city spokesman said.

Companies with two headquarters are rare and distance could challenge the management abilities of Bezos and other leaders, but some investors and analysts also saw the geographical diversification as a way to cut costs and risk.

It would also make it easier for the conglomerate to break up down the line if it so chooses.

“The company is changing radically and it depends so heavily on disruptive thinking. Moving to a new city and finding a new talent pool is a good idea,” HRC Retail Advisory chief executive Antony Karabus said.

Incentives from land and fee cuts, to relocation packages would be a major part of the decision, Amazon said.

The company’s plan is to also boost its political leverage at a time when it has been blamed for the decline of brick-and-mortar retailers.

US President Donald Trump has criticized Amazon as doing “great damage,” costing jobs in US cities and states.

The company said it is seeking proposals by Oct. 19 and would select the location next year.

Amazon began as a bookseller and grew into the Internet’s biggest retailer. It built an award-winning movie studio and has expanded around the world. Its workforce has exploded to more than 380,000 from less than 25,000 since it moved to downtown Seattle in 2010.

However, Seattle has become an expensive city, ranking 44th on the Economist Intelligence Unit global cost-of-living ranking.

“The high cost of living and the high cost of real estate, all of that adds up to why expanding in that market is not viable,” said Burt Flickinger, managing director of retail consultant Strategic Resource Group.

Ashim Mehra, an analyst who works on the US$256 million Baron Opportunity Fund, said the dual-city strategy pushes Amazon toward an eventual split between its Amazon Web Services business and its retail business.

The move would ease the threat of increased regulations on the company and cut internal competition for the best engineers, he said.

Amazon’s revenue was US$136 billion at the end of last year, up sharply from US$34 billion in 2010. It recently snatched up Whole Foods Market Inc for US$13.7 billion.

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