A judge just delivered a ‘gut punch’ to Microsoft in Amazon’s lawsuit over the Pentagon’s $10 billion JEDI cloud contract, an analyst says (MSFT, AMZN)

  • Amazon will likely be able to prove the Pentagon made an error in evaluating Microsoft’s bid for its $10 billion cloud computing contract, a federal claims judge said in a preliminary order unsealed Friday.
  • The judge’s comments are a “gut punch” to Microsoft, indicating Amazon’s challenge to the Pentagon’s decision might be more contentious than the company hoped, Wedbush Securities analyst Dan Ives said.
  • Microsoft disagrees with the judge’s comments and said the company needs to begin work on the contract urgently.
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A federal claims judge thinks Amazon will likely be able to prove the Pentagon made an error in evaluating Microsoft’s bid for its $10 billion cloud computing contract.

That’s a “gut punch” to Microsoft, indicating Amazon’s challenge to the Pentagon’s decision might be more contentious than the company hoped, Wedbush Securities analyst Dan Ives said.

The Department of Defense last year award its Joint Enterprise Defense Infrastructure (JEDI) deal, a massive cloud project that will store and manage sensitive military and defense data. Amazon challenged the decision in US Court of Federal Claims, alleging political intervention — specifically citing President Donald Trump’s frequent criticism of Amazon CEO Jeff Bezos, who also owns the Washington Post newspaper.

Federal claims judge Patricia E. Campbell-Smith paused Microsoft’s work on the contract while the lawsuit plays out and, in a court filing unsealed on Friday, revealed the reason she granted a preliminary injunction is because she believes Amazon will likely be successful in proving the Department of Defense made an error in evaluating an aspect of Microsoft’s proposal and that the error affected the outcome.

“This news from the courts is clearly a gut punch to MSFT which was hoping to navigate this trial with a victory and resume work on JEDI in the spring,” Ives, who is typically bullish on Microsoft, said in an email to Business Insider.

“Clearly this Amazon vs. MSFT battle on JEDIgate appear heading down a contentious path as the Pentagon’s decisions are scrutinized. While we still believe this deal is MSFT’s to lose, comments about ‘the error’ was a clear initial win for Amazon in this trial,” he said.

In an email to Business Insider on Monday, Microsoft said the judge focused on one small aspect of the JEDI contract, that it does not believe the DOD made an error and that the agency carefully evaluated the proposal based on many factors and selected Microsoft’s as “significantly superior.”

Microsoft spokesperson Frank Shaw said in a statement said Microsoft needs to begin work on the contract urgently. “Time matters because those who serve our country urgently need access to this essential modern technology,” he said.

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