Last night, it hit me like a thunderclap. I had just finished reading the remarkable Microsoft (MSFT) - Get Report conference call transcript, the one that showed me that Azure, the company's cloud business, is giving Amazon Web Services (AMZN) - Get Report a genuine run for the money. I read it twice to be sure that it could be as good as they say. Both Satya Nadella and Amy Hood, the CEO and the CFO, are so fabulously understated it was difficult for me to really parse the pieces.
I am now sure that, pound for pound, or bit for bit, Azure is AWS' equal if not its superior.
I know the idea of Doug McMillon all the way out in Bentonville Arkansas and Satya Nadella up in Redmond Washington may, at first, seem like a strange pairing. Nadella's a soft spoken intellectual type. McMillon is a quiet rebuilder.
But they each have the missing ingredient that the other lacks to stop Amazon. One hundred million people in this country shop every week at Walmart. There are 5000 Walmarts in the country, which puts one a few minutes from almost every American's house.
They have a decent website and they have Jet.com, but they do not have a web services business. So you have the data, the infrastructure, needed to mine and to ship with built-in nationwide distribution centers.
Microsoft's Azure, an almost $20 billion enterprise is growing so fast that I have to believe that it is either superior or equal to Amazon's Web Services. You can't get that growth without an amazing product.
Right now Amazon and Walmart are at war. Walmart does not want its suppliers -- and it is the number one customer of pretty much every supplier that sells there -- to sell on Amazon Web Services. It wants them to sell on anyone but. No trading with the enemy.
Amazon lacks a brick and mortar presence to serve food. So it is buying the 400 store chain that is Whole Foods (WFM) .
That's great for a very small percentage of the country. Microsoft would be teaming with the largest retailer.
Now think about the advantages Amazon currently has. They use artificial intelligence to mine what you buy to suggest things. Walmart doesn't. But if you combined Walmart with the data mining that Azure has, you would crush Amazon because you have data from 100,000,000 weekly shoppers. That's just plain better than what Amazon has. As far as interface, you can use Jet.com to crush Amazon's web face if you get some of those super-smart Microsoft engineers going for you.
The 5,000 store base, with its huge parking lots, would make it ideal for food distribution. Walmart could easily create a geek squad for electronic merchandise. It already sells appliances. It can get merchandise much cheaper than anyone else because of its clout.
It would be an unassailable combination.
Now, there are multiple stumbling blocks. First, why would either exec want to get together? Microsoft is doing fabulously alone. Walmart is getting better and better.
Second, someone in government would find the merger of a $572 billion company, Microsoft, a $229 billion company, Walmart, as too powerful. But what happens when Amazon, at $490 billion, gets to $800 billion? Won't you need a competitor with scale?
Of course Microsoft could easily just go merge with cross-town neighbor Costco, where you already have a Prime-like existence. That's only a $66 billion acquisition and I actually think the family at the top of Costco, looking at the landscape, may very well be interested, just as an intellectual exercise. However, Costco has about a tenth the store base of Walmart, so, in that sense, it's not that much better than Whole Foods, although it is most appreciably better. Still, it's easily done and Costco is much more threatened than Walmart, so there is an exigency to the combination.
I know everyone wants to go it alone. I think Amazon is too powerful and needs a counterweight.
It needs Walmsoft, or Micromart to give the American people a realistic alternative.
Either way, Satya and Doug, let's have a talk. Let's get it done! I'll charge nothing for the bankers fee. I just think it's too fabulous not to noodle over, or at least take the meeting. I wish I could set it up. But I can put it out there for consideration. In a day and age where Amazon is in a position to wipe out everyone, it makes too much sense not to do so.
Microsoft shares fell 0.7% to $73.73 by Friday's close. Walmart's rose 0.2% to $76.16.
(This article originally appeared at 7:10 ET on Real Money, our premium site for active traders. Click here to get great columns like this from Jim Cramer and other writers even earlier in the trading day.)
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