Werner Vogels on the excess capacity myth:

    The excess capacity story is a myth. It was never a matter
    of selling excess capacity, actually within 2 months after
    launch AWS would have already burned through the excess
    Amazon.com capacity.  Amazon Web Services was always
    considered a business by itself, with the expectation that
    it could even grow as big as the Amazon.com retail operation.

http://www.quora.com/How-and-why-did-Amazon-get-into-the-clo...