Amazon (AMZN) Moves Higher as Investors Cheer Kiva Acquisition; Analysts Comment

Amazon.com (Nasdaq: AMZN) is ripping higher today following the announced acquisition of Kiva Systems on Monday night.

Kiva is a leader in the eCommerce fulfillment sector though its unique offering of warehouse automation systems (WAS). The company describes WAS as "a complete order fulfillment solution that encompasses inventory control, forward replenishment, picking, packing, shipping sortation, finishing, and quality control to simultaneously improve productivity, speed, accuracy and flexibility."

With Amazon racing to expand fulfillment centers as it looks to improve shipment speeds, the deal was a smart one for Amazon.

Some analysts chimed in on the news:

• Goldman Sachs said: "[Kiva] develops robots that locate individual items in a warehouse and then transport them (via portable shelves) to workers who do packing and shipping. Thus the employees remain stationary on the perimeter of a facility while the system of wifi connected robots move around the interior in an optimized fashion."
  
  The firm noted Amazon's headcount in 2011 rose 67 percent, compared with a 41 percent pop in revs and fulfillment expense as a percentage of revs moving 1 point higher to 9.2 percent.
  
  
• J.P. Morgan said Amazon's acquisition of Kiva will allow it to improve fulfillment capabilities and reduce the drag on margins.
  
  
• UBS thinks Kiva did about $100 million of revs in 2011, and Amazon's thin margins should lead to the deal being accretive moving forward.
  
  
• Baird was also bullish on the acquisition, saying Kiva's WAS is one of the "most significant" innovations in the logistics industry. The firm said checks with companies utilizing the system provide a 2x to 4x improvement in the speed of moving packages.
  
  Amid the praise, Baird did have one concern: Amazon could have employed Kiva's technology at a cheaper cost than buying the entire kit and caboodle. Baird estimates that Amazon paid roughly 5x revenues for the company.

On the last statement, J.P. Morgan also noted that it costs about $1 million to $2 million for the initial implementation of Kiva's system, with costs of up to $15 million, $20 million, or more, for systems above 1,000 robots.

Amazon could sell the technology to other companies if it wanted to gain back the initial outlay. But why would it? Amazon wouldn't have bought all of Kiva if is simply wanted to outfit all of its fulfillment centers; it wants to keep Kiva technology out of the hands of Wal-mart (NYSE: WMT), Target (NYSE: TGT), and, to a lesser extent, Barnes & Noble (NYSE: BKS).

Shares of Amazon have been trending higher all day, now up 4.4 percent on the session. Shares moved as much as 4.7 percent to $194.32 Tuesday afternoon.

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