Amazon’s Processor Play Could Mean Future M&A for VCs

Amazon is looking to get more into the mobile space. And why not? Best Buy, struggling on public markets and with shareholders praying for a take-private offer, just made a bold play, promising customers Amazon’s discounts right in person, in their aisles.

If other mega-retailers follow suit, it could spell trouble for the biggest name in e-commerce—perhaps why Amazon is looking to acquire the makers and patents of parts for its tablet, which it is certain to improve and expand if it wants to be a serious competitor in the handset space.

There’s just one problem. Looking at Amazon’s M&A from recent years, the company’s biggest acquisitions haven’t been anywhere near the handset space—instead, Amazon has been spending billions on robotic warehouse employees, diaper retailers and Zappos, its foray into footwear. So what does Amazon have to do to become competitive in the handset arena? Plenty:

Patents, patents, patents: Microsoft, Facebook and Google have all been out gobbling up patents left and right, gearing up for years of courtroom battles for millions of dollars. Amazon, however, is well at the back of the pack and needs to surge quickly. A deal for Research in Motion might be a quick way to jump light years ahead in the IP game.

Analytics: Compare Amazon to Google, which has snapped up startups like fflick, Zynamics and SocialGrapple to make the most of big data. Amazon will increasingly need to do this to make sense of its handset and how its transition from desktop to mobile is impacting its business. Silicon Valley is practically teeming with startups that would be applicable to Jeff Bezos’ baby’s new vertical.

Mapping: Already, Amazon is off to a decent start here—earlier this year, it bought startup UpNext, a maker of highly detailed 3-D maps for smartphones. That won’t match up equally next to Google Maps, or even the Apple maps that iPhone users have been decrying, but it is a start.

A new friend: How about Facebook? Mark Zuckerberg recently—in his first public comments in what has otherwise been a disastrous 2012 in the wake of his company’s IPO—said the social network would not try to become a smartphone maker. At the same time, Facebook is increasingly in need of a mobile presence, far beyond its lackluster app. Factor in the company’s facial recognition capabilities and a partnership with Amazon could yield a location-based deals offering that would beat companies like Groupon to a pulp.

Cut losses: Already, Amazon has egg on its face from its LivingSocial investment. The daily deals space became flooded with competitors that sucked the valuation right out of companies like Groupon and LivingSocial. It is highly improbably that either will regain the market cap they enjoyed at the zenith of their respective valuations, and Amazon should probably stick to the business it knows best in-house rather than trying to build scale by shelling out big bucks for overpriced startups.

Image Credit: Amazon