April 28, 2009, 12:00 AM

Amazon books an acquisition to grow Kindle

Amazon has made a key acquisition to help grow its Kindle e-book reader business. Amazon has purchased Lexcycle Inc., the developer of Stanza, a software program for downloading and purchasing digital books for PCs and mobile devices.

Don Davis

Editor in Chief

Amazon has made a key acquisition to help grow its Kindle electronic book reader business, which some analysts believe could generate as much as $1.2 billion in annual revenue as soon as 2012.

Amazon, No. 1 in the Internet Retailer Top 500 Guide, has purchased Lexcycle Inc., the developer of Stanza, a software program for downloading and purchasing digital books for PCs and mobile devices. Terms of the deal weren’t disclosed. “Like Amazon, we believe there is a lot of innovation ahead for e-books and we could not think of a better company to join during this exciting time,” Lexcycle CEO Marc Prud’hommeaux wrote in his corporate blog.

Amazon isn’t talking about the acquisition, but Lexcycle and Stanza will help the biggest online retailer diversify Kindle, its electronic book reading device, with additional features and functions. Stanza supports exporting digital content to personal computers, mobile devices and web-enabled book readers, including Kindle. Stanza also enables book buyers to shop an online catalog of more than 100,000 titles and purchase and download books to an iPhone or iPod.

In a short time, Lexcycle, which was founded in early 2008, has already established a significant user base. Stanza is available in 12 languages and each day between 40,000 and 60,000 books are downloaded from its online books catalog, Lexcycle says. In November, Lexcycle announced that more than 1 million users had downloaded Stanza to an iPhone or iPod. “By concentrating on the user experience from the acquisition of content to reading the content, we have found a formula that resonates with users,” says Lexcycle chief operating officer Neelan Choksi.

Lexcycle also continues to build up more relationships with digital content providers. In January, Lexcycle signed an agreement with online e-book and audio book retailer BooksOnBoard to make available 30,000 e-book titles through Lexcycle’s Stanza e-book reader application for iPhones.

With its acquisition of Lexcycle, Amazon can enhance Kindle with a broader selection of content and more mobile applications at a time when other companies and retailers, including Barnes and Noble Inc. and Sony Corp, are introducing or upgrading electronic book readers. Amazon in February updated Kindle with new features such as faster page turns and longer battery life.

In as little as three years, sales of Kindle and related content and services could reach $1.2 billion, says CitiGroup Global Markets Internet research director Mark Mahaney. But to reach critical mass, Amazon will need to keep adding even more related services. “Kindle right now is the iPod of the book world, but they will need to keep innovating to stay out front,” says Mahaney.

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