el reg said it best
"Amazon's EC2 was likely the brainchild of a mid-level ops director who overbought for a data center and had to come up with a way to save his own ass. Use a free, open source project like Xen for virtualization, give it a sunshine-up-the-ass name like Elastic Compute Cloud, and start pulling in all those venture capital dollars like Cisco and Sun did during the first dotcom catastrophe. Fuck me, give that man a raise."
it makes sense to me, given that they had to build for peak capacity in Q4, which was probably 3-10x+ what they needed for the rest of the year.
From my talks with people who claim to be at ground zero of the birth of EC2 they dispute this theory, but I don't know if I believe them.