An analyst thinks the Pentagon will split up Microsoft's $10 billion JEDI cloud contract and give a piece to Amazon - and maybe even other companies

• The Pentagon on Thursday said it "wishes to reconsider" its decision to award the $10 billion JEDI cloud computing contract to Microsoft.
• Wedbush Securities analyst Dan Ives said it's likely the Department of Defense will split up the contract and give a piece to Amazon - and "and potentially other vendors."
• When Microsoft won the JEDI contract, it came as a huge upset - Amazon Web Services was the favorite to win.
• Amazon filed a lawsuit challenging Microsoft's win, alleging political interference with the bidding process, and that the Pentagon had made mistakes in assessing specific technical aspects of the Amazon Web Services cloud against Microsoft Azure.
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After the Pentagon told a court it "wishes to reconsider" its decision to award the $10 billion JEDI cloud computing contract to Microsoft, Wedbush Securities analyst Dan Ives - frequently bullish on Microsoft - said it's likely the Department of Defense will split up the contract and give a piece to Amazon.

Amazon has been fighting the Department of Defense's decision to award to Microsoft the Joint Enterprise Defense Infrastructure (JEDI) contract to move its sensitive data to the cloud. Amazon claims the bidding process was tainted by improper interference from President Donald Trump, a frequent critic of Amazon CEO Jeff Bezos and the Washington Post, which Bezos also owns.

A federal claims judge had previously approved a preliminary injunction pausing work on the contract, saying Amazon will likely be able to prove the Pentagon made an error in evaluating Microsoft's bid, and that the error likely affected the outcome. Now, the Pentagon says that it will reassess specific portions of the bid, in light of Amazon's challenges to certain technical aspects of the Microsoft Azure cloud.

The Pentagon, according to Ives, generally has two choices: Either continue to fight Amazon in court and have work on the contract delayed or reconsider the bid and break up the contract between Amazon and Microsoft, and possibly additional vendors.

"The writing is on the wall that the Pentagon needs to likely break up this contract in order to move it along and start the procurement process given how critical the JEDI deal is to the overall DOD and longer term strategic global military operations/infrastructure," Ives wrote.

The Pentagon is requesting the court remand the case to the Department of Defense for 120 days to "reconsider certain aspects of the challenged agency decision." The filing also indicates that the Department of Defense won't seek additional bids from any other companies, but that it will rather reassess Microsoft Azure versus Amazon Web Services in light of the specific technical points raised by Amazon.

Microsoft has called for work to resume on the contract. "Time matters because those who serve our country urgently need access to this essential modern technology," Microsoft spokesperson Frank Shaw said.

Shaw on Thursday said the company supports the Pentagon's "decision to reconsider a small number of factors as it is likely the fastest way to resolve all issues and quickly provide the needed modern technology to people across our armed forces."

An Amazon Web Services spokesperson on Thursday said the company is "pleased that the DoD has acknowledged 'substantial and legitimate' issues that affected the JEDI award decision, and that corrective action is necessary."

"We look forward to complete, fair, and effective corrective action that fully insulates the re-evaluation from political influence and corrects the many issues affecting the initial flawed award," the spokesperson said.

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