JEDI contract means much more to Microsoft than to Amazon
The US Department of Defense gave Microsoft "the best possible validation they could get" by awarding a multibillion-dollar defense agreement to the company's cloud platform over Amazon, CNBC's Jim Cramer said Monday.
At the other end of the spectrum, losing on the potential $ 10 billion contract is not a "big deal for Amazon," the "Mad Money" host said. The request for proposals came to two of the most valuable companies by market value.
"The Pentagon basically states that Microsoft's cloud platform is as good as Amazon's, or at least close enough for government work," Cramer said, adding that it is a "much more significant gain for Microsoft Azure than it would have been for Amazon Web Services. "
Azure, Microsoft's cloud computing service, topped Amazon Web Services, IBM Cloud and Oracle Cloud in competition for the deal worth as much as $ 1[ads1]0 billion by the end of 2029, the Pentagon announced Friday. Under the Joint Enterprise Defense Infrastructure agreement, also known as JEDI, the company will build an enterprise cloud infrastructure that will support the Department of Defense's business and mission operations.
Microsoft reported in its first-quarter fiscal results, which beat Wall Street estimates, that Azure's public cloud business grew by 59%, even though the company did not allocate Azure's dollar sales. The Intelligent Cloud segment, which includes Azure and Windows Server, among others, earned $ 10.85 billion in total revenue.
"We already know that Microsoft fired on all cylinders. This JEDI contract simply confirms that," Cramer said.  When it comes to Amazon, AWS is still the largest cloud infrastructure provider, although it may not have received a proper shot at the contract, Cramer said. Former Secretary of Defense James Mattis said President Donald Trump instructed him to "screw Amazon" out of the deal.
Trump has on several occasions sent out his complaints with Jeff Bezos, billionaire Amazon founder and CEO and Washington Post owner. Amazon was considered a favorite for the deal after it was awarded a CIA contract in 2013.
"It would not shock me if he, or anyone in his orbit, thumbed the scales in favor of Microsoft," Cramer said , even though he says there is no big concern for Amazon.
"You have to understand: AWS made $ 9 billion in revenue this quarter," he said. "They are not crying to lose what could have been a $ 10 billion deal in ten years."
The deal means a lot to Microsoft, whose share rose 2.46% to $ 144.19 apiece in Monday's session. Amazon's shares barely shrugged since the news broke. But Amazon's loss could be viewed as a victory for IBM and Alphabet, Cramer suggested.
He said "that means Amazon will not be able to monopolize all the government's cloud-related" defense spending. "If Amazon won the JEDI contract, AWS would have been the Department of Defense's standard cloud infrastructure for the next 10 years. Now, however, the smaller players are more likely to win business."
"While the stock had a big run here, I think Microsoft remains attractive," the host said. "When it comes to Amazon, there's no skin to lose this business. The real problem is that they've spent so much to grow the business, and while I'm good, it can give you more opportunities to buy the stock in weakness on the road because of Wall Street's inherent short-term view. "
Disclosure: Cramer's charitable trust owns shares in Amazon, Microsoft and Alphabet.
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