1. What are the key operating segments at Amazon? How much (in %) did each operating segment contribute to Amazon's revenues (net sales) in 2016? (
.nl Sprint LTE 3:19 PM :3 23% [E]! 1of85 UNITED STATES SECURITIES AND EXCHANGE COMMISSION \\llt'asltingtcmq ILC. 20549 {Mark One) le ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d} OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 21116 Ilf El TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transitlnn period from to Commission le No. 0110-22513 (Exact name of registrant as specied in its charter) Delaware 91-1646860 [Statenrolhrjurisdietinnnf (InsEmptnyu incorporation nrorgsaisatioa) IdenticatinnNo.) 410 Terry Avenue North Seattle, Washington same52m teas} era-1mm (Addrua and telephone number. Including m. antic, ample-arr principal exemlive afrm) Securities registered pursuant to Section lztb} u! the Act: Title nl'EIrII Clan Nam nl'EaclaEnln-grnnW'hielaR-zgiatend Common Stock. par value $.11] per share NASDAQ Global Select Market Securities registered pursuant to Section 121g} of the Act: Indicate by check mark ifthe registrant is a well-known seasoned issuer. as dened to Rule 405 ofthe Securities Act. Yes E No El Indicate by check mark ifthe registrant is not required to file reports pumant to Section 13 or Section 1[d) ofthe Exchange Act, Yes El No E Indicate by check mark whether the registrant (1) has filed all reports required to he led by Section 13 or 15(d] of the Securities Exchange Act o1192-t during the preceding 12 months (or for such shorter period tttat the registrant was required to file such reports], and (2) has been subject to such filing requirements for ttte past 90 days Yes E No El Indicate by cheek mark whether the registrant has submitted electronically and posted on its corporate Web site. if any. every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation ST during the preceding 12 months [or for such shorter period that the registrant was required to submit and post such les). Yes E No 1] Indicate by check mark if disclosure ofdelinquent lers pursuant to ltem 405 of Regulation S-K is not contained herein, and will not be contained. to the best of registrant's knowledge, in denitive proxy or information statements incorporated by reference in Part 111 of this Form lit-K or any amendment to this Form lD-K. E Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated ler, or a smaller reporting company, See denitions of"large accelerated filer,\" \"accelerated filer\" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer E Accelerated. ler El Nan-accelerated ler El [Do not check ifa smaller reporting company] Smaller reporting company El Indicate by check mark whether the registrant is a shell company (as dened in Rule 12b-2 ofthe Exchange Act). Yes El No E Aggregate market value ofvoting stock held by non-afliates ol'the registrant as ofJune 20. 2016 230.129.378.534 Number of shares ofcommon stock outstanding as ofJanuary 25, 2017 477,170,618 The information required by Part 111 ofthis Report. to the extent not set forth herein. is incorporated herein by reference from the registrant's definitive proxy statement relating to the Annual Meeting ofShareholders to be held in 21117. which denitive proxy statement shall be led with the Securities and Exchange Commission within 120 days after the end of the scal year to which this Report relates. AMAZONCUM, INC. FORM Ill-K For the Flscul Year Ended December 31, 21116 INDEX Page PART I .nl Sprint LTE 3:19 PM >3 23% [Eli instructureuploads.33.amazonaws.com 4of85 Table ofContents Content Creators We serve authors and independent publishers with Kindle Direct Publishing, an online service that lets independent authors and publishers choose a 70% royalty option and make their books available in the Kindle Store, along with Amazon's own publishing arm, Amazon Publishing. We also offer programs that allow authors, musicians, lmmakers, app developers, and others to publish and sell content. Competition Ourbusinesses encompass a large variety ofproduct types, service offerings, and delivery channels. The international marketplace in which we compete is evolving rapidly and intensely competitive. and we face a broad an-ay ofcompetitors from many different industry sectors around the world. Our current and potential competitors include: (1) online, otine, and multichannel retailers, publishers, vendors, distributors, manufacturers, and producers ofthe pmducts we offer and sell to consumers and businesses; {2) publishers, producers, and distributors ofphysical, digital, and interactive media ofall types and all distribution channels; (3) web search engines, comparison shopping websites, social networks. web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers; (4} companies that provide e-comrnerce services, including website development, advertising, fulllment, customerservice, and payment processing; (5)cornpanies that provide illlment and logistics services for themselves or forthird parties, whether online or online; (6) companies that provide information technology services orproducts, including on- premises or cloud-based infrastnrcture and other services; and {7) companies that design, manufacture, market, or sell consumerelectronics, telecommunication, and electronic devices. We believe that the principal competitive factors in ourretail businesses include selection, price, and convenience, including fast and reliable fulfillment. Additional competitive factors for our seller and enterprise services include the quality, speed, and reliabrlity ofour services and tools, as well as customers' ability and Willingness to change busmess practices. Some ofour current and potential competitors have greater resources, longer histories, more customers, greater brand recognition, and greatercontrol over inputs critical to our various businesses. They may secure better terms 'om suppliers, adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access to supply, drrect consumers to their own offerings instead ofours, lock-in potential customers with restrictive terms, and devote more resources to technology, infrastmcture, fulfillment, and marketing. Each ofourbusinesses is also subject to rapid change and the development ofnew business models and the entry ofnew and well- inded competitors. Other companies also may enter into business combinations or alliances that strengthen their competitive positions. Intellectual Property We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, and similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade-secret protection, and condentiality and/or license agreements wrth our employees, customers, partners, and others to protect our proprietary rights. We have registered, orapplied for the registration of, a numberofU.S. and international domain names, trademarks, service marks, and copyiights. Additionally, we have filed U.S. and international patent applications covering certain ofour proprietary technology. We have licensed in the past, and expect that we may license in the future, certain ofour proprietary rights to third parties. Seasonality Our business is atfected by seasonality, which historically has resulted in higher sales volume during our fourth quarter, which ends December31. We recognized 33%, 33%, and 32% ofour annual revenue during the fourth quarter of2014, 2015,and 7.016. E mployees We employed approximately 341 ,400 full-time and pan-time employees as ofDecember 31, 2016. However, employment levels uctuate due to seasonal factors atfectrng our business. Additionally, we utilize independent contractors and temporary personnel to supplement our workforce. We have works councils, statutory employee representation obligations, and union agreements in certain countries outside the United States. We consider our employee relations to be good. Competition forqualied personnel in our industry has historically been intense, particularly for soware engineers, computer scientists, and othertechnical staff. Available Information Our investor relations website is www.amazon.comlir and we encourage investors to use it as a way ofeasily nding inrm-nation about us. We promptly make available on this website, free ofcharge, the reports that we le or furnish with the 4 Table ofContents .nl Sprint LTE 3:19 PM >3 23% [Eli instructureuploads.33.amazonaws.com 3of85 Table ofContents AMAZONEOM, INC. PART I Item 1. Business This Armani Report on Form iii-K and the documents incorporated herein by reference cunminerurd-iooking statements based on expectations, estimates, undprojeetiuns us afthe date qflhislirig, Actual results may differ mieriayjmm those expressed injurwardloukirig statements. See Item L4 ofPart [7 "Risk Factors, " Amazoncom, Inc. was incorporated in 1994 in the state ot'Washington and reincorporated in 1996 in the state ofDelaware. Our principal corporate o'Ices are located in Seattle, Washington. We completed our initial public oering in May 199'? and our common stock is listed on the NASDAQ Global Select Market underthe symbol \"AMZN.\" As used herein, \"Amazoncom,\" \"we,\" \"our,\" and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates otherwise. Ge neral Amazoncom opened its virtual doors on the World Wide Web in July 1995.We seek to be Earth's most customercentric company. We are guided by four principles: customer obsession rather than competitorfocus, passion forinvention, commitment to operational excellence, and long-term thinking. In each ofour segments, we serve our primary customer sets, consisting ofconsumers, sellers, developers, enterprises, and content creators. In addition, we provide services, such as advertising services and co-branded credit card agreements. We have organized our operations into three segments: North America, International, and Amazon Web Services (\"AWE"). These segments reect the way the Company evaluates its business performance and manages its operations. Additional information on our operating segments and product information iscontained in Item 8 ofPart II, \"Financial Statements and Supplementary DataiNote 11~Segment Information.\" See Item 7 ofPart II,\"Management's Discussion and Analysis of Financial Condition and Results ofOperationsiResults of OperationsSupplemental Information" for supplemental inirmation about our net sales. Our company-sponsored research and development expense is set forth within \"Technology and content\" in Item 8 ofPart 11, \"Financial Statements and Supplementary Data4onsolidated Statements of Operations." Consumers We serve consumers through our retail websites and focus on selection, price, and convenience. We design our websites to enable hundreds ofmillions ofunique products to be sold by us and by third parties across dozens ofproduct categories. Customers access our websites directly and through our mobile websites and apps. We also manufacture and sell electronic devices, including Kindle e-readers, Fire tablets, Fire TVs, and Echo, and we develop and produce media content. We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers, and to improve our operating e'iciencies so that we can continue to lowerprices for our customers. We also provide easy-to-use functionality, fast and reliable litlllment, and timely customerservice. In addition, we oEerAmamn Prime, an annual membership program that includes unlimited free shipping on tens ofmillions of itents, access to unlimited instant streaming ofthousands ofmovies and TV episodes, and other benets. We fulll customer orders in a number ofways, including through: North America and International fulllment and delivery networks that we operate; co-sourced and outsourced arrangements in certain countries; and digital delivery. We operate customer service centers globally, which are supplemented by co-sourced an-angements. See Item 2 ofPart I, \"Properties.\" Sellers We offer programs that enable sellers to grow their businesses, sell theirprodttcts on our websites and theirown branded websites, and tlfill orders through us. We are not the seller ofrecord in these transactions. We earn xed fees, a percentage ofsales, per-unit activity fees, interest, or some combination thereof, for our seller programs. Developers and Enterprises We serve developers and enterprises ofall sizes, including start-ups, government agencies, and academic institutions, through our AWE segment, which o'ers a broad set ofglobal compute, storage, database, and other service offerings. 3 Table ofContents Co ntent Creators We serve authors and independent publishers with Kindle Direct Publishing, an online service that lets independent authors and publishers choose a 70% royalty option and make their books available in the Kindle Store, along with Amazon's own publishing am], Amazon Publishing. We also offer programs that allow authors, musicians, lmmakers, app developers, and others to publish and sell content. Competition Ourbusinesses encompass a large variety ofproduct types, service olferings, and delivery channels. The international marketplace in which we compete is evolving rapidly and intensely competitive, and we face a broad array ofcompetitors from many different industry sectors around the world. Our current and potential competitors include: (1) online, oline, and multichannel retailers, publishers, vendors, distributors, manufacturers, and pmducers ofthe products we offer and sell to consumers and businesses; {2)publishers, producers, and distributors ofphysical, digital, and interactive media ofall types and all distribution channels; (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers; (4} companies that provide e-commerce services
