Pentagon deal to spice up Microsoft’s place in cloud computing: analysts

(Reuters) – Inc’s (AMZN.O) agency grip on the cloud computing market might be threatened by Microsoft Corp’s (MSFT.O) multi-billion greenback contract with the Pentagon, Wall Avenue analysts mentioned on Monday.

FILE PHOTO: A Microsoft brand is seen subsequent to a cloud in Los Angeles, California, U.S. on June 14, 2016. REUTERS/Lucy Nicholson/File Picture

Final week, Microsoft received the Pentagon contract termed Joint Enterprise Protection Infrastructure Cloud, or JEDI, that can be price as much as $10 billion over a interval of 10 years, beating out favourite Amazon’s AWS.

Shares of Microsoft rose as a lot as 3.4% to a document excessive of $145.67 on Monday.

“Backside line, the contract is a big win for Microsoft and vaults Azure ahead within the cloud platform wars,” J.P. Morgan analyst Mark Murphy mentioned.

Amazon’s Amazon Net Companies presently holds about 32% of the may computing market, whereas Microsoft’s Azure has about 18%, based on analysis agency Canalys.

Whereas AWS contributes practically 13% to Amazon’s whole internet gross sales, Azure accounts for about 33% of Microsoft’s income and are each a significant money cow for the businesses.

Friday’s determination got here after months of controversy and protest over the method for awarding the deal and even drawing the eye of President Donald Trump, who has publicly taken swipes at Amazon, lengthy thought-about the frontrunner.

Analysts at brokerage agency Compass Level mentioned the deal was a “important victory” for Microsoft over AWS and added that Amazon may problem the choice.

“We count on a level of handwringing amongst Congressional Democrats given the political and sensible dimensions of this challenge, however our sense is that lawmakers are unlikely to wade too deeply into these waters,” Compass Level’s Marshall Senk mentioned.

Brokerages Mizuho and Impartial Analysis raised their value goal on the Microsoft inventory on the prospect of the corporate getting a lift from the contract.

“Ultimately, the truth that Azure was chosen as the only real supplier for this essential challenge is a testomony to simply how far it has come over the previous couple of years,” mentioned Mizuho analyst Gregg Moskowitz, who raised his value goal by $eight to $160.

Wedbush analyst Daniel Ives famous that the deal helps Microsoft achieve an even bigger chunk of an estimated $1 trillion of subsequent decade cloud enterprise and $100 billion of U.S. authorities enterprise.

Reporting by Ayanti Bera, Tanvi Mehta and Ambhini Aishwarya in Bengaluru; Modifying by Maju Samuel

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