The New York court filings made by the US Department of Defense indicate that it is interested in relooking at the multi-billion-dollar cloud contract awarded to Microsoft Corporation (Nasdaq: MSFT).
The cloud division of the online retailer Amazon.com, Inc. (Nasdaq: AMZN) filed a lawsuit at the Court of Federal Claims against the US Department of Defense (Pentagon) on November 8th regarding the latter’s decision to bestow the $10 billion JEDI (Joint Enterprise Defense Infrastructure) contract, spread over ten years, to Microsoft (MSFT).
The contract is crucial for Amazon to retain its leadership position in the cloud computing space. The aforementioned court filing was made as a response to the lawsuit filed by Amazon on behalf of its cloud division, Amazon Web Services (AWS). Despite the setback news for Microsoft, the stock closed at $158.83, up $19.77 or 14.22% from the prior close.
Last month, a federal judge ordered temporary freezing on the multi-billion dollar Joint Enterprise Defense Infrastructure or JEDI cloud contract awarded to Microsoft as a response to Amazon’s lawsuit. The Pentagon has responded by saying that it “wishes to reconsider its award decision in response to the other technical challenges presented by AWS.”
The Department of Defense has asked for 120 days to evaluate the issue. The organization wants to particularly look into an issue associated with “online marketplace offerings.”
Before the contract was awarded to Microsoft, analysts and think tanks had anticipated Amazon as the top contender as it has been approved by the US government to manage confidential information.
Amazon has blamed President Donald Trump for persuading the Department of Defense in awarding the contract to Microsoft when competing bids for the JEDI project were considered. Amazon further alleged that Trump played a hideous role because of his personal disagreements with Jeff Bezos, and his antipathy towards Washington Post, which is also owned by Bezos.
Commenting on the decision by the US Department of Defense, the AWS spokesperson said, “We are pleased that the DoD has acknowledged ‘substantial and legitimate’ issues that affected the JEDI award decision, and that corrective action is necessary. We look forward to complete, fair, and effective corrective action that fully insulates the re-evaluation from political influence and corrects the many issues affecting the initial flawed award.”
While agreeing to the DoD’s intention to evaluate their decision to reconsider the award, Frank Shaw, Microsoft’s Corporate Vice President of Communications, argued that his company is well qualified to receive the award as its offering is technically better than that of AWS.
Shaw said: “We believe the Department of Defense made the correct decision when they awarded the contract. However, we support their decision to reconsider a small number of factors as it is likely the fastest way to resolve all issues and quickly provide the needed modern technology to people across our armed forces.
Over two years, the DoD reviewed dozens of factors and sub-factors and found Microsoft equal or superior to AWS on every factor. We remain confident that Microsoft’s proposal was technologically superior, continues to offer the best value, and is the right choice for the DoD.”
Notably, Google or its parent company Alphabet, did not participate in the cloud computing contract. In 2018, the search engine giant had clarified that the contract does not match with its AI (artificial intelligence) principles. The review of a $10billion contract is expected to turn the stock of Microsoft range bound with bearish bias in the short-term.
The historical price chart indicates that the stock is facing resistance at 170. Additionally, the stochastic oscillator is also moving towards the bearish zone. The next major support exists only at 130. Therefore, we are anticipating the stock to decline in the days ahead.
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