Amazon.com will boost staffing at
its secretive Silicon Valley-based hardware unit by at least 27 percent
over the next five years as it tests Internet-connected “smart” home
gadgets such as a one-button device to order supplies.
The plans, detailed in a
little-known government document and by people familiar with the matter,
signal Chief Executive Officer Jeff Bezos’ intentions to double down on
the No. 1 U.S. online retailer’s hardware strategy. This is despite the
lukewarm reception of Amazon’s new Fire smartphone and some investors’
criticism of its heavy spending on highly experimental projects.
The Lab126 division, which
developed Amazon’s Kindle and other consumer electronics devices, plans
to boost its full-time payroll to at least 3,757 people by 2019,
according to the agreement reached with California in June that would
give Amazon $1.2 million in tax breaks.
Amazon will invest $55 million
in Lab126’s operations in Sunnyvale and Cupertino, the agreement posted
on the California governor’s website shows.
This expansion comes as Lab126
tests connected-home devices that could open up a new front in its war
against Google and Apple, two people familiar with Lab126’s activities
said recently.
The sources requested anonymity because they are not authorized to speak to the media.
Technology companies see
Internet-connected dishwashers, thermostats, and other household devices
that can “talk” to one another as ways to fuel demand for products and
services. But skeptics say many of these devices cost too much for most
consumers and could take years to go mainstream.
Amazon is testing a simple WiFi
device that could be placed in the kitchen or a closet, allowing
customers to order products like detergent by pressing a button, one of
the people said. Lab126 is also interested in wearable devices, the
other person said. Both sources stressed that such devices may never
come to market.
These details shed rare light on
the division at Amazon, which is notoriously tight-lipped about any
unit’s operations and staffing.
In a statement, Amazon said
Lab126 was moving “incredibly quickly” and cited the company’s 2014
devices, including the Fire phone, Fire set-top box, and several new
tablets and e-readers.
“We will continue to invent and
create new features, services and products, and to support this
innovation. Lab 126 is also growing very quickly,” Amazon spokeswoman
Kinley Pearsall said.
Whether
or not Amazon ultimately sells connected home and wearable devices, the
experiments hint at Bezos’ broader ambitions. Lab126 has become
increasingly important to Amazon’s broader aim to use devices to make it
indispensable to its more than 240 million active users.
Bezos is deeply involved in developing Lab126’s projects, from the 2007 debut of the first Kindle e-reader to the Fire phone.
The Fire phone, which Lab126
worked on for four years, debuted this summer to lackluster sales and
reviews. Earlier this month, Amazon cut the price of its phone to 99
cents with a two-year contract with AT&T.
Amazon shares are down nearly 20 percent this year.
Other tech leaders are also
seeking a central place in the home. In January, Google bought Nest
Labs, a smart thermostat maker, for $3.2 billion. In June, Apple
announced plans for HomeKit, its own framework for connecting household
gadgets.
Embedding households with such
devices would be much more lucrative than merely selling gadgets like
wireless LED light bulbs or WiFi garage-door openers.
With Lab126’s experiments,
Amazon envisions homes decked out with Internet-connected sensors that
would allow it to tell customers ahead of time when they need to replace
air conditioner filters or service their washing machines, one of the
sources said.
“If I walk into my laundry room
and there’s a big pool of water and the floor needs to be replaced, I’d
love to know about it two weeks before it happens,” said Ryo Koyama, CEO
of Weaved, a startup working on connected-home technology.
Lab126 had almost 3,000 full-time employees in its 2013 taxable year.
(Reporting by Deepa Seetharaman and Noel Randewich; editing by Richard Chang.)
