(Bloomberg) — Microsoft Corp. has been awarded the sought-after JEDI cloud computing contract with the Pentagon valued as much as $10 billion over a decade, the Defense Department said in a statement on Friday night.
The decision deals a blow to Amazon.com Inc., which had been seen as the most likely winner in a deal whose terms were hotly contested by another rival, Oracle Corp.
The Pentagon has said the cloud project, known as the Joint Enterprise Defense Infrastructure, or JEDI, is intended to help bring the Pentagon’s technology into the modern era.
The Defense Department is investing in commercial cloud services, which host computing power and storage in remote data centers, to improve data security and speed up real-time sharing of information across the military.
The Pentagon said the contract was expected to be completed by 2029.
Microsoft shares rose 0.6% to $140.73 at Friday’s close.
Amazon was long seen to have the upper hand in the competition after it won a lucrative cloud contract with the Central Intelligence Agency. But politics entered the picture. President Donald Trump. Trump has long been at odds with Amazon’s chief executive Jeff Bezos. Bezos also owns the Washington Post, which Trump claims has treated him unfairly in its coverage
“We’re surprised about this conclusion,” said Douglas Stone, an Amazon spokesman. He added that the company was “the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion. We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure.”
Amazon is considering mounting a legal challenge to the award, according to a person with knowledge of the matter. The concern is that U.S. President Donald Trump might have interfered with the decision, said this person, who asked to remain anonymous discussing legal strategy. Trump surprised the industry earlier this year when he openly questioned whether the contract was being competitively bid.
The decision is a big boost for Microsoft’s cloud business.
“This is a paradigm changer for Microsoft,” said Daniel Ives, an analyst at Wedbush Securities who has a “buy” rating on Microsoft. “It’s a landmark win that will change the cloud computing battle over the next decade. It’s a shocker to Amazon and Bezos to lose it. But for Microsoft it signals a new era of growth in cloud. This adds $10 to the stock in my opinion.”
The Defense Department had come under criticism for its handling of the winner-take-all project, which was marred by accusations of improper ties between former Pentagon officials and Amazon.
The Pentagon’s decision to stick by its procurement strategy brought fresh attacks from Trump, lawmakers and Oracle, who have argued that the contract terms were overly narrow.
Bezos and Microsoft founder Bill Gates are the two richest men in the world, according to the Bloomberg Billionaires Index.
–With assistance from Dina Bass.
To contact the reporters on this story: John Harney in Washington at [email protected];Naomi Nix in Washington at [email protected]
To contact the editors responsible for this story: Sara Forden at [email protected], John Harney
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