Amazon CEO Jeff Bezos Will Step Down, But Not Away

Amazon.com (AMZN) will soon have its first new leader in 27 years.

The e-commerce giant announced Tuesday that founder and chief executive Jeff Bezos will step down as CEO in the third quarter to assume the role of executive chair. Andy Jassy, who heads up AMZN's cloud business, will succeed Bezos as chief executive.

Bezos in a blog post said he will use his position as executive chair "to focus my energies and attention on new products and early initiatives."

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It's a remarkable changing of the guard for the $1.7 trillion retailer and tech firm.

Amazon Becomes a Titan Under Bezos

Bezos, 57, who previously worked at hedge fund D.E. Shaw, started Amazon in his garage roughly three decades ago. Over the years, Bezos grew Amazon from being a modest bookseller in the age of dial-up internet to one of the largest companies in the world.

Along the way, Amazon revolutionized the retail industry and made an enormous impact on most of the businesses it touched.

That hasn't been a good thing for competitors, of course – a number of businesses were driven into bankruptcy, or at least off course, by Amazon's entry into their fields.

Bezos' legacy is also muddied by a history of criticism over, and even investigations into, the company's treatment of workers.

“Jeff Bezos' business model for Amazon was feasting on public subsidies, paying little or no taxes and dehumanizing and mistreating his employees," said Stuart Appelbaum, President of the Retail, Wholesale and Department Store Union (RWDSU), which currently is conducting a unionization drive for the workers at an Amazon fulfillment center in Bessemer, Alabama.

However, AMZN stock made Bezos and his investors a great fortune. Amazon shares have returned almost 187,000% since going public at $18 per share in May 1997. The S&P 500 gained 352% on a price basis over the same span. With dividends reinvested, the broad market index returned a still-lagging 594%. (Amazon doesn't pay a dividend.)

Amazon's relentless growth propelled Bezos to the heights of wealth. Per Forbes, he's the wealthiest person in the world, with a net worth of $196.2 billion.

Bezos remains the company's largest shareholder with 10.6% of its shares outstanding.

What's Next for AMZN?

Amazon won't completely lose the Bezos effect, of course, as he plans to stay on as executive chair.

"As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions," Bezos said in a letter to employees. Blue Origin is Bezos’ space company, which he funds by selling $1 billion in Amazon stock a year.

The Bezos news was met with approval by both analysts and the market.

"Having a CEO and founder become an Executive Chairman is hardly unprecedented," says Scott Kessler, Global Sector Lead for Technology Media and Telecommunications at Third Bridge. "In fact, arguably Amazon's most comparable peer, Alibaba, saw its CEO and founder, Jack Ma, become Executive Chairman years ago."

Shares in Amazon ticked up fractionally in after hours trading. The stock gained 70.5% over the past 52 weeks vs. an increase of 18.6% for the S&P 500. AMZN's market capitalization of $1.71 billion trails only Apple (AAPL) and Microsoft (MSFT) in the race for world's most valuable company.

Almost lost amid the Bezos announcement was Amazon's fourth-quarter earnings report, which blew past Wall Street's forecast. Earnings on an adjusted basis rose to $14.09 a share vs. a consensus estimate of $7.03, according to S&P Global Market Intelligence. Revenue soared 44% year-over-year to $126 billion. Analysts were projecting the top line to hit $119.7 billion.

Analysts' average recommendation on AMZN stands at Buy. Of the 51 analysts covering the stock tracked by S&P Global Market Intelligence, 35 rate it at Buy, 10 call it a Hold and one analyst rates it at Sell. Five analysts have no opinion.

The Street expects Amazon to generate compound annual growth rate of 33% over the next three to five years. That's an almost unthinkable pace for a company as massive as Amazon. Then again, Amazon has routinely topped all manner of expectations under Bezos' leadership over the past 27 years.