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2 Mois : De Oct 2019 à Déc 2019
By Aaron Tilley
Microsoft Corp.'s win of a landmark Pentagon cloud-computing contract adds force to the software company's effort to unseat Amazon.com Inc. as the undisputed leader in the multibillion-dollar cloud-computing market.
For both of the tech giants, providing cloud-computing services -- where customers rent some of their large computing horsepower rather than investing in their own -- has become a key profit driver and one of the most closely watched growth areas by investors.
Amazon was a pioneer in the cloud business, propelling it to a dominant market position. But Microsoft CEO Satya Nadella also has bet heavily on the cloud, spurring strong growth for the Redmond, Wash., company.
On Friday, the Pentagon awarded Microsoft the Joint Enterprise Defense Infrastructure, or JEDI, contract that could be worth up to $10 billion over the next decade. Amazon, which already provides cloud services to the Central Intelligence Agency, was widely seen as the front-runner. Microsoft's win is one of the most public examples, to date, showing that it poses a serious threat to Amazon's dominance.
The award came the same week Microsoft and Amazon reported earnings that signal the competitive dynamics in the cloud are changing. Microsoft said sales for its Azure cloud business grew 59% in the quarter compared with the year prior. For Amazon Web Services, or AWS, quarterly sales grew 34.7% from a year earlier -- a significant slowdown from the past -- helping spur a sharp drop in its share value.
Microsoft isn't the only tech giant trying to challenge Amazon's cloud position. Alphabet Inc.'s Google has been ramping up its efforts. It last year hired Thomas Kurian to run its cloud business from Oracle Corp., another cloud competitor with big ambitions.
International Business Machines Corp. also has prioritized cloud growth. It splashed out $34 billion to buy open-source software giant Red Hat Inc. to strengthen its hand.
AWS sales are still far larger than Microsoft's Azure revenue or any of the other rivals, according to reported figures and analysts estimates, but the gap is narrowing. Amazon had 31.5% of the cloud market share in the previous quarter compared with Microsoft with an 18.1% slice, according to analysis firm Canalys. But that gap is more than 3 percentage points narrower than it was a year prior as the total market grew around 37%, Canalys data shows.
The JEDI deal brings Microsoft another step closer to contesting Amazon's position as the world's largest public cloud vendor, said Holger Mueller, principal analyst at Constellation Research Inc.
"This might help Microsoft overtake Amazon to become the No. 1 cloud vendor," Mr. Mueller said.
Microsoft last week also secured a deal with German software giant SAP SE that makes Azure the preferred cloud for the European tech company's customers.
The JEDI contract, which Stifel Nicolaus analyst Brad Reback said could eventually boost annual Microsoft free cash flow by $300 million, is one of several to deepen Microsoft's ties to the Pentagon.
Microsoft late last year won a $480 million contract to supply 100,000 HoloLens augmented reality glasses to the U.S. Army. It beat out well-funded augmented reality startup Magic Leap. The U.S. government in August also awarded a 10-year $7.6 billion Pentagon contract award to General Dynamics Corp. that includes replacing existing IT systems with Microsoft's Office 365.
The JEDI loss is a blow to Amazon's goal of making government contracts a larger portion of the business for its cloud division. Amazon last year said it was setting up a second headquarters in Northern Virginia, known as HQ2, in part to house its expanding government-linked operations.
Amazon, in a statement Friday, said it was surprised by the Pentagon's choice. It can contest the outcome but hasn't said if it would.
Microsoft's president for U.S. regulated industries, Toni Townes-Whitley, said Saturday that "we brought our best efforts to the rigorous JEDI evaluation process and appreciate that DoD has chosen Microsoft."
Amazon also faces the prospect of competition for its cloud work for U.S. spy agencies. The intelligence community, in a new plan published in June, said it wanted to "promote innovation and competition" by using multiple vendors.
The JEDI loss, if its stands, doesn't mean the Pentagon's doors are shut to Amazon. While the military had drawn criticism for planning to select a single contractor for the megadeal even before Microsoft was named the winner, Pentagon officials pushed back against those claims, countering that the Defense Department would still have multiple cloud contracts beyond JEDI. The Defense Department has said it has several hundred separate clouds and JEDI would merely serve as an umbrella system.
Even as it announced the Microsoft award, the Pentagon, in a statement Friday, said "additional contracting opportunities are anticipated."
Write to Aaron Tilley at firstname.lastname@example.org
(END) Dow Jones Newswires
October 27, 2019 16:48 ET (20:48 GMT)
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