Oracle shares tumbled on Friday after the networking giant lost a critical court case against the Pentagon and Amazon. The loss will allow the DoD to proceed with awarding a $10 billion contract to one of the two finalists – a group that includes Amazon and Microsoft.
Ever since the Pentagon named Amazon a finalist for the contract, critics have accused Amazon and the Pentagon of conflicts of interest, claiming that Amazon effectively secured the extremely lucrative project before the bidding even began. Earlier this week, WSJ publicized new evidence showing that senior Amazon executives met with senior DoD officials, including then-Defense Secretary James Mattis, to discuss the project before the bidding even began.
The Pentagon has already delayed its decision on who will get the contract to build the Pentagon’s new “war cloud” infrastructure, known as the Joint Enterprise Defense Infrastructure, or JEDI. And some suspected that the decision would be delayed yet again due to the court challenge.
Finishing JEDI is expected to take up to a year, making the winner of the contract a de facto long-term partner with the Pentagon and a major military contractor in their own right.
The computing project would store and process vast amounts of classified data, allowing the Pentagon to use artificial intelligence to speed up its war planning and fighting capabilities.
The court ruled in favor of the DoD and Amazon, saying Oracle had not met certain criteria when bids were due.
The JEDI decision is due next month, and the Pentagon confirmed that Microsoft and Amazon are the final two contenders.
At this point, if AWS gets the contract, the company and the DoD will be dogged by these suspicion, which could hurt Amazon’s chances. Despite Jeff Bezos’s highly visible feud with President Trump, it appears his company is still the front-runner to win the contract.
On May 24, Oracle filed an updated complaint with the US Court of Federal Claims alleging that the procurement process for JEDI had been rife with conflicts of interest.
Oracle alleged that at least two Amazon employees, Deap Ubhi (who was also briefly employed at the Pentagon before returning to Amazon) and Anthony DeMartino, improperly influenced the process to favor AWS at the expense of other competitors. Oracle claims these men helped influence the Pentagon’s decision to structure JEDI as a ‘winner-take-all’ contract, ensuring that Amazon, the cloud computing industry leader, would win the entire $10 billion. These claims have caught the attention of some lawmakers, who have started looking into the bidding.
At this point, it seems just as likely that the contract could go to Microsoft. That would be a major blow for AWS’s market leader status, and could impact the company’s revenue guidance and, ultimately, its share price. But Amazon is still the industry leader, and its lobbying efforts clearly ran pretty deep.
Bezos might still be able to pull it off, and in the process, gain access to the largest repository of classified defense-related intelligence this country has ever seen.
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Author: Tyler Durden