Amazon Will Protest Microsoft’s Latest Government Contract

November 15, 2019
364 Views

The cloud computing market is one of the most fiercely contested areas of the tech industry today. Major tech companies like Amazon, Google, SalesForce, and Microsoft have already established their presence, leading the way for smaller providers.

Despite having the largest share of the cloud computing market, Amazon is unhappy with recent developments. It plans to protest a $10 billion government contract that was awarded to Microsoft last month.

Amazon Claims Bias in New Deal

The Pentagon awarded the Joint Enterprise Defense Infrastructure (JEDI) contract to Microsoft on October 25, shocking the tech industry and analysts. It was previously believed that Amazon would win the contract, especially considering that the company already has a $600 million cloud contract with the Central Intelligence Agency.

In a statement this week, Amazon said that it is “uniquely experienced and qualified to provide the critical technology the U.S. military needs and remains committed to supporting the DOD’s modernization efforts. We also believe it’s critical for our country that the government and its elected leaders administer procurements objectively and in a manner that is free from political influence. Numerous aspects of the JEDI evaluation process contained clear deficiencies, errors, and unmistakable bias – and it’s important that these matters be examined and rectified.”

Amazon has filed a protest with the U.S. Court of Federal Claims, asking that the contract with Microsoft be overturned. It’s not the only company to cry foul at the decision to give the contract to Microsoft. Oracle, which lost out early in the process, has filed a case with the U.S. Court of Appeals. In addition, Oracle wants an injunction to prevent Microsoft from beginning work on the contract before any pending cases have been heard.

Microsoft hasn’t commented on any of the recent news.

Outcome Will Affect Investor Sentiment

Microsoft and Amazon investors will need to watch this story closely. The deal will likely impact stock confidence no matter the outcome. If the courts uphold the contract, Microsoft will be stronger with more revenue in the pipeline. If the courts overturn the contract and it goes back to bidding, the confidence will go wherever it lands after a second procurement round.

  • Microsoft (NASDAQ: MSFT) has outperformed the stock market this year, with growth of 45.77% since January. Total market capitalization is $1.12 trillion.
  • Amazon (NASDAQ: AMZN) has underperformed the benchmarks, with growth of 16.82% in the same period. Total market capitalization is $869.19 billion.

It’s important to note that Microsoft’s stock performance was strong well before the contract was announced last month. Increased revenue and earnings growth across the board suggests that Microsoft is the better cloud stock today.

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