Defeat by Amazon Web Services Could Prompt IBM Acquisitions

NEW YORK (TheStreet) -- IBM (IBM) suffered a gutting defeat after U.S. Court of Federal Claims Judge Thomas Wheeler ruled against the U.S. Government Accountability Office's recommendation that Big Blue be given another chance to bid for a four-year, $600 million CIA cloud computing contract that had been won by Amazon's (AMZN) Amazon Web Services in January, on grounds that the process had been unfair.

"It's certainly interesting times when IBM is the underdog to an online bookstore in procuring government IT," said Carl Brooks, an internet infrastructure services research analyst at IT enterprise specialist 451 Research.

IBM, a long-time contractor for the government, said that it plans to appeal the decision and reiterated the superiority of its offer.

Richard Stiennon, the chief research analyst at cyber defense industry intelligence firm IT-Harvest, said that the ruling in favor of relative newcomer AWS represents the fiercely competitive bidding process for lucrative government contracts, and that while the defeat was a huge disappointment for IBM, it doesn't reflect on IBM's future ability to secure market share expansion in the cloud. After all, IBM has shown that it is willing to make aggressive investments into the cloud, with its most recent cloud expansion milestone consisting of its acquisition of the privately held cloud computing infrastructure company SoftLayer Technologies in July for a reported $2 billion.

"This the Federal court decision does not deal IBM out of the cloud, although it may cause them to look at emulating Amazon's AWS service, perhaps through another acquisition, so they can gain market share in the Platform as a Service and Infrastructure as a Service business" where AWS currently leads, Stiennon explained.

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