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Amazon buys robot maker Kiva for $775m

Deal for North Reading company is 2d-largest by online retailer

Kiva Systems’ robots shuttled merchandise around a Gilt Groupe distribution center in Shepherdsville, Ky.

DAWGHAUSE PHOTOGRAPHY

Kiva Systems’ robots shuttled merchandise around a Gilt Groupe distribution center in Shepherdsville, Ky.

Amazon.com Inc. has agreed to buy warehouse robot maker Kiva Systems Inc. of North Reading for $775 million in cash, both companies said on Monday, in the second-largest acquisition ever made by the giant e-commerce firm.

The deal is expected to be finalized in the second quarter of 2012, according to a release from Amazon, and Kiva’s headquarters will remain in North Reading.

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The purchase of Kiva came as a surprise to Bob Trebilcock, executive editor of Modern Materials Handling magazine, a Boston magazine that covers the warehouse industry. He questioned why Amazon felt the need to buy the robot maker, as opposed to just buying the robots. “I’m shocked,’’ Trebilcock said. “I had no clue this was coming.’’

By way of explanation, a statement attributed to Dave Clark, Amazon’s vice president of global customer fulfillment, said, “Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack, and stow. Kiva shares our passion for invention, and we look forward to supporting their continued growth.’’

Amazon operates distribution centers across the United States and in a number of foreign countries, but it is unclear how Amazon will implement the technology. “We are still evaluating how and where we will use Kiva technology at Amazon,’’ Amazon spokeswoman Mary Osako wrote in an e-mail, adding that Kiva will continue to offer service and support to other e-commerce companies that use its robots.

Kiva did not return calls for comment. In a release, Mick Mountz, Kiva’s chief executive and founder, said, “I’m delighted that Amazon is supporting our growth.’’

Privately held Kiva makes warehouse robots designed for e-commerce and mail-order companies like Amazon, which ship millions of items to consumers. When an order comes in, a robot, which can handle a load of 3,000 pounds, is sent to the shelf holding the item. It lifts the entire shelf and carries it to a work station, where a human worker picks out the item and packs it for shipment to a customer. The robot returns the shelf to its original location, then awaits the next order.

The Kiva system is less stressful for workers, who otherwise might walk for miles every day, picking items off shelves. “The idea is, the person stays stationary, and something brings the goods to the person,’’ said Trebilcock, adding that the robots also allow faster order fulfillment and lower labor costs for online retailers. “Companies with money have been investing in material-handling automation. They have been investing in solutions that take labor out of the equation.’’

Kiva’s customers include a host of major e-commerce companies, among them The Gap Inc., Staples Inc., and Office Depot Inc. Also on Kiva’s customer list are two companies that Amazon has already acquired. In 2009, it bought online footwear retailer Zappos.com for $1.2 billion, the company’s biggest acquisition to date; and in 2010, it paid $545 million for Quidsi Inc., parent company of online baby care retailer Diapers.com. Diapers.com still uses the Kiva system, but Osako said the technology is no longer in use at Zappos.

Kiva hired Amy Villeneuve as its president and chief operating officer last year.

Hiawatha Bray can be reached at h_bray@globe.com.
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