Amazon Targets Robot Handlers After Zappos Shoe Deal

NEW YORK ( TheStreet) -- Amazon ( AMZN) is buying privately held Kiva Systems for $775 million in cash in its second biggest acquisition ever behind the $817.3 million stock deal for online shoe-seller Zappos in 2009, according to Bloomberg data.

The move is targeted at the online retail giant's distribution centers, where Kiva-designed robots may help the company further automate the management of its inventory, in favor of more mechanical warehousing systems like conveyor belts and carousels.

"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, Amazon.com's vice president of global customer fulfillment, in a press release.

According to Kiva's Web site, the company's robots can help pick up product to ship from the inventory stocked in a warehouse on an individualized basis without batching, a common industry practice. "Order cycle times can be as short as 15 minutes and "rush orders" can be inserted into the work schedule at any point," proclaims Kiva Systems of its approach.

Kiva Systems was founded in 2003 by Chief Executive Mick Mountz, who previously worked at online grocer, Webvan. In 2009, Kiva Systems was named the 6th fastest growing company in the U.S. by Inc. 500 and n 2012, Fast Company Magazine named Kiva 'the 23rd Most innovative company in the world,' according to its Web site.

"For the past ten years, the Kiva team has been focused on creating innovative material handling technologies," said CEO Mountz in a statement. "I'm delighted that Amazon is supporting our growth so that we can provide even more valuable solutions in the coming years."

The acquisition has been approved by Kiva's private shareholders, with Amazon paying $775 million in cash, when counting for the assumption of options and other items. The deal is expected to close in the second quarter of 2012.

The move will put some of Amazon's cash to work in a deal that may help the company drive cost savings and service gains as its margins are notoriously low. For example, the company's net income came in at $177 million in the fourth quarter, down 58% from last year's equivalent total, despite sales rising 35% year-over-year to $17.43 billion.

Amazon shares closed Monday at $185.52, up 47 cents on the day, and the stock was flat in the extended session. Year-to-date, the shares have risen nearly 7% but they are still well down since hitting a 52-week high of $246.71 in mid-October.

Written by Antoine Gara in New York.

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