Microsoft (MSFT) - Get Report just won the contract from the Department of Defense to service the agency with cloud computing, which could be one step closer for Microsoft to catch Amazon (AMZN) - Get Report as number one in the larger cloud market.
Microsoft shares rose 2.51% to $144.26 Monday after the news broke. On Friday after the market close, the Department of Defense surprisingly announced it is awarding its JEDI (Joint Enterprise Defense Infrastructure) cloud contract to Microsoft rather than Amazon, Microsoft's arch rival in the fast-growing cloud computing business. The "general purpose cloud contract award," as the DoD puts it, "is meant to "address critical and urgent unmet warfighter requirements for modern cloud infrastructure," the agency said.
"Not only is it [Jedi deal] worth $10 billion over the next 10 years, but it could lead to Microsoft more easily getting other government cloud contracts," said Nelson Wang TheStreet's tech editor. Indeed, Dan Ives, analysts at Wedbush securities sayd the Jedi deal gives Microsoft "credibility" with other government agencies in need of cloud services. "It's pretty huge" for Microsoft, Wang said.
But for the cloud space in general, here's how this deal could help Microsoft:
"The additional $10 billion in revenue gives Microsoft more scale," said Eric Jhonsa, TheStreet's tech columnist. "It gives Microsoft more resources to invest in research and development." Still, Amazon's AWS is 3 times larger than Azure, Microsoft's marquee cloud product, Jhonsa mentioned, making the chase to be number one in cloud market share a tough one for Microsoft.