Amazon buys army of robots

@CNNMoneyTech March 20, 2012: 12:18 PM ET

NEW YORK (CNNMoney) -- Amazon is buying Kiva Systems, a manufacturer of bright orange robots that scuttle around warehouses filling orders, for $775 million.

The all-cash deal, which is expected to close in the second quarter, will be Amazon's (AMZN, Fortune 500) biggest acquisition since its purchase of Zappos in 2009.

Kiva, which was founded in 2002, makes robots that scoot around warehouse floors and pick up items from shelves to help fulfill customer orders. Amazon is already a customer, along with other major retailers including Staples (SPLS, Fortune 500), The Gap and CrateandBarrel.com.

Snagging those customers wasn't easy, Kiva CEO and founder Mick Mountz told CNNMoney in November.

"Fulfillment is the core of these operations, so when we were pitching them, they were hearing 'heart-lung transplant,'" Mountz said.

The orange Kiva fleet doesn't come cheap. A "startup kit" of robots costs $1 million to $2 million, and a large warehouse operation with 1,000 robots costs $15 million to $20 million.

After the cash comes the logistics: Setting up the robots' software and grid systems inside a customer's warehouse requires six months of planning, simulated modeling and testing. Then logistics managers must be trained before handing them the keys to the operation.

But once the system is in place, shippers can shave significant time and money off their fulfillment costs.

Mountz told CNNMoney in November that his company is profitable. Sales grew 130% to more than $100 million in 2010, he said, and Kiva is hiring 20 to 30 people each quarter to keep up with demand.

Kiva is backed by $33 million from investors, $20 million of which is from Bain Capital Ventures. The company plans to keep its headquarters outside of Boston after the acquisition. To top of page

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