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Amazon Has Acquired Secretive Israeli Startup Annapurna Labs for its Data Center Business

The deal could help Amazon's fast-growing AWS cloud computing business run more efficiently and less expensively.

Amazon Web Services
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

Amazon has agreed to purchase an Israeli startup that designs networking chips to help make data centers run more efficiently, the company said today.

“We can confirm that Amazon agreed to acquire Annapurna Labs,” a spokeswoman for Amazon’s AWS unit told Re/code.

The Israeli financial newspaper Calcalist first reported the talks between the companies. Reports said the deal was expected to be around $350 million, though Amazon declined to comment on price.

Annapurna has not publicly revealed much about its technology. But it’s likely Amazon will use their chip designs in its data centers to make its fast-growing AWS cloud computing business run more efficiently and less expensively. It’s also possible that the chip designs could benefit Amazon’s data centers focused on its internal businesses.

Startups and big companies such as Netflix use AWS’s services to store and distribute its data across the Internet more efficiently. Amazon doesn’t break out AWS’s sales figures but analysts have estimated it’s a $5 billion-a-year revenue business with gross margins approaching 90 percent. The category of businesses AWS is grouped with on Amazon’s financial reports is the fastest-growing at the company, rising 43 percent year over year in the first nine months of 2014. But that’s down from 59 percent a year earlier, as AWS has cut prices to fend off competition with rivals IBM, Google and Microsoft.

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