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Pentagon Cancels JEDI Contract, Sets Stage For Microsoft-Amazon Rematch

The U.S. Department of Defense on Tuesday canceled its litigation-snarled cloud-computing contract known as JEDI. Microsoft (MSFT) won that $10 billion contract in October 2019, but Amazon (AMZN) contested it in court. Microsoft stock was flat on the news while Amazon stock jumped.




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In a news release, the Pentagon said the Joint Enterprise Defense Infrastructure contract no longer fits its needs “due to evolving requirements, increased cloud conservancy, and industry advances.”

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After Microsoft beat out heavily favored Amazon Web Services to win the JEDI contract, Amazon claimed interference from the Trump administration. Amazon cited then-President Donald Trump’s animosity toward the e-commerce giant in a lawsuit over the contract.

The Pentagon plans to open a new contract, the Joint Warfighter Cloud Capability, to competition. The agency says it will solicit bids from both Amazon and Microsoft for the contract, adding that they are the only cloud service providers that can meet its needs. The Department of Defense wants to modernize its information technology infrastructure to take advantage of the internet cloud.

Microsoft Stock Falls On Contract Loss

On the stock market today, Microsoft stock rose a penny to 277.66 after being down most of the day. Amazon stock jumped 4.7% to 3,675.74.

In a blog post, Microsoft said it supports the Pentagon’s decision to seek a new cloud computing contract.

“The DoD faced a difficult choice: Continue with what could be a years-long litigation battle or find another path forward,” Toni Townes-Whitley, president of U.S. regulated industries at Microsoft, wrote. “The 20 months since DoD selected Microsoft as its JEDI partner highlights issues that warrant the attention of policymakers: when one company can delay, for years, critical technology upgrades for those who defend our nation, the protest process needs reform.”

In a written statement, Amazon said it looks forward to competing for the new contract.

“We understand and agree with the DoD’s decision,” Amazon said. “Unfortunately, the (original) contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement.”

Amazon went on to say: “Our commitment to supporting our nation’s military and ensuring that our warfighters and defense partners have access to the best technology at the best price is stronger than ever. We look forward to continuing to support the DoD’s modernization efforts and building solutions that help accomplish their critical missions.”

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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