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Amazon tipped to appeal after losing $10bn JEDI cloud bid to Microsoft

Analysts have predicted that Amazon will take legal action against the US government after the firm lost a $10bn (£7.8bn) federal cloud computing bid to Microsoft.

The Pentagon announced on Friday that it had awarded the controversial single-supplier contract to Microsoft, following a protracted contest and an alleged attempt by Donald Trump to block Amazon from bidding.

The ten-year project, known as JEDI (Joint Enterprise Defence Infrastructure), will entail Microsoft modernising the Department for Defense’s operations and migrating them to the cloud.

Microsoft’s shares soared to a record high on the news, which pushed its market cap to $1.1tn (£860bn) and prompted speculation that it could close the gap on Amazon’s cloud business, Amazon Web Services (AWS).

But analysts have suggested that Amazon is likely to contest the decision. Analysts at Compass Point, a US brokerage, described the deal as a “significant victory” but warned that it could be challenged by Amazon.

Meanwhile, in a note to clients, Daniel Ives, an analyst at Wedbush Securities, said that Amazon would take the Defense Department to court, albeit predicting Microsoft would ultimately win.

Business Insider reported over the weekend that Amazon was considering its options in light of the verdict, which had initially been predicted to go its way. The company won a similar contract for the Central Intelligence Agency in 2013.

A number of companies had originally been in the running for the deal, including Google, Oracle and IBM. But Google withdrew from the process in October 2018 after thousands of its employees staged walkouts to raise concerns about the use of the company’s artificial intelligence tools in military contexts. Oracle and IBM were later informed that they did not meet the technical requirements of the project.

In July, Donald Trump intervened in the process, calling Microsoft, Oracle and IBM “some of the greatest companies in the world”. He has a long-running feud with Amazon chief executive Jeff Bezos (pictured with Microsoft chief executive Satya Nadella).

An AWS spokesperson said in a statement: “We’re surprised about this conclusion. AWS is the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly lead to a different conclusion. We remain deeply committed to continuing to innovate for the new digital battlefield where security, efficiency, resiliency, and scalability of resources can be the difference between success and failure.”

The Defence Department told the New York Times: “The acquisition process was conducted in accordance with applicable laws and regulations. All offerors were treated fairly and evaluated consistently with the solicitation’s stated evaluation criteria.”