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 The plans, detailed in a little-known government document and by
people familiar with the matter, signal Chief Executive Officer Jeff
Bezos's 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 smart phone 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 Inc and Apple
Inc, 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 wi-fi 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.
AIM TO BE INDISPENSABLE
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.
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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 wi-fi
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)
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