SAN FRANCISCO (Reuters) – Amazon.com Inc (AMZN.O) paid about $90 million to acquire the maker of Blink home security cameras late last year, in a secret bet on the startup’s energy-efficient chips, people familiar with the matter told Reuters.
The deal’s rationale and price tag, previously unreported, underscore how Amazon aims to do more than sell another popular camera, as analysts had thought. The online retailer is exploring chips exclusive to Blink that could lower production costs and lengthen the battery life of other gadgets, starting with Amazon’s Cloud Cam and potentially extending to its family of Echo speakers, one of the people said.
Amazon views its in-house devices as key to deepening its relationship with shoppers. The Cloud Cam and Echo currently need a plug-in power source to operate. Blink, which says its cameras can last two years on a single pair of AA lithium batteries, could change that.
Amazon declined to comment on the acquisition’s terms or strategy.
The deal so far has drawn little attention. The camera maker announced its takeover by Amazon with scant details in a Dec. 21 blog post. Analysts have viewed Blink as part of the retailer’s strategy for Amazon Key, a new program where shoppers can set up a smart lock and surveillance camera so delivery personnel can slip packages inside their homes when they are away. Amazon also sees opportunity in the security camera market as smart-home technology expands.
But Blink was not merely a camera business. Its little-known owner, Immedia Semiconductor, was started in Massachusetts by old hands from the chip industry. Chief Executive Peter Besen and two of his co-founders came from Sand Video, which had designed chips in the early 2000s that decoded a new and improved video standard.
Flybridge Capital Partners, Comcast Ventures, Baker Capital, Dot Capital and some suppliers were investors in the company.
Amazon’s regulatory filings show it spent $78 million on acquisition activity in the quarter ended Dec. 31. Sources said the bid was competitive, and that compensation and incentives offered by Amazon pushed the deal’s value to about $90 million.
Madrona’s Jacobson, who had no knowledge of the acquisition’s details, speculated that Amazon might apply the Blink team’s expertise to cameras in drones or in its new checkout-free stores.
The chips could give Amazon other advantages, too.
The proprietary chip design will make it harder for rival retailers to copy Amazon’s devices, said Matt Crowley, chief executive of Vesper, a sensor and semiconductor company that makes microphones.
And now that Amazon owns its own chips, it can go straight to the manufacturers, cutting out middlemen chip designers such as Ambarella Inc (AMBA.O), which has powered GoPro Inc (GPRO.O) products. Amazon has a division called Annapurna Labs that makes an unrelated kind of chip, and it was not clear which supplier it uses for chips that primarily process video.
“Vertical integration reduces cost,” Crowley said. Digital video chips “are one of the more expensive components” in a camera.
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