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Why You Should Sell Amazon's Stock to Buy Microsoft's

Meanwhile, Amazon is facing competition in the business of cloud computing, including from Microsoft. Rackspace (RAX), IBM (IBM), Google (GOOG) and numerous other cloud competitors virtually assure that Amazon will have an incredible challenge to gain pricing power.

At the same time, the cloud business is quickly becoming commoditized. Shares in Rackspace fell under $30 last week and closed at the lowest price since 2010. In other words, cloud computing margins are under more pressure.

Last month, Google announced a 68% price drop for cloud storage and over 30% for Google Compute Engine. Google lowers the cost of using its cloud service through automatic discounts based on use, instead of contracts. Users are able to receive the best pricing without long-term obligations.

Let that sink in for a moment. Google is aggressively going after Amazon's cloud computing market share, and if there is any lingering doubt of what that means to Amazon's revenue, margins and profitability selling cloud services, take the time to review Yahoo!(YHOO) in 1999 and more recently, BlackBerry (BBRY).

Retail is never easy, and Sears (SHLD), Montgomery Ward, Woolworth's, J.C. Penney (JCP) are reminders that nationwide, profitable, retail powerhouses can become unprofitable and sometimes close up shop. Unlike the above companies, Amazon has never been widely profitable relative to sales.

In order to facilitate continued growth, Amazon is focusing on customers from Walmart (WMT) and Target (TGT) while the brick-and-mortar retailers are dedicating more resources to capture online sales. Walmart recently stated the company may increase spending for online sales promotion by 36%. The company's global web sales rose 30% in fiscal 2013, and it expects more of the same this year. 

Amazon investors are in a precarious position. Holding the carrot of future profits as a motivation to buy the stock ignores the obvious elephant in the room that there will always be competition. Becoming as big as you can for the sake of scale is a means to an end, not the end in itself.

Dollar for dollar invested, Microsoft is a world apart from Amazon and is a better long-term investment.

At the time of publication, Weinstein had no positions in securities mentioned.

Follow @RobertWeinstein

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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