Amazon to Acquire Kiva Systems for $775 Million

Online retailer Amazon will buy material handling robot and software maker Kiva Systems for $775 million. The deal, to close in the second quarter of 2012 pending certain conditions, is expected to enable Amazon to improve logistics productivity. The Kiva technology will be added to Amazon’s existing warehouse infrastructure.

“Amazon has long used automation in its fulfillment centers, and Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow,” said Dave Clark, vice president, global customer fulfillment, Amazon.com. “Kiva shares our passion for invention, and we look forward to supporting their continued growth.”
Following the acquisition, Kiva Systems’ headquarters will remain in North Reading, Massachusetts.

Under the terms of the agreement, which has been approved by Kiva’s stockholders, Amazon will acquire all of the outstanding shares of Kiva for approximately $775 million in cash, as adjusted for the assumption of options and other items.

Amazon’s 2011 annual report identified the fulfillment operations of its distribution centers as risk factors affecting its business.

“If we do not adequately predict customer demand or otherwise optimize and operate our fulfillment centers successfully, it could result in excess or insufficient inventory or fulfillment capacity, result in increased costs, impairment charges, or both, or harm our business in other ways,” the report stated. “A failure to optimize inventory will increase our net shipping cost by requiring long-zone or partial shipments. Orders from several of our websites are fulfilled primarily from a single location, and we have only a limited ability to reroute orders to third parties for drop-shipping. We and our co-sourcers may be unable to adequately staff our fulfillment and customer service centers."

According to a Wall Street Journal report, Amazon expects to continue selling Kiva technology to other retailers.

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