Judge pauses Microsoft's work on 10-year, $10 billion JEDI cloud contract

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A U.S. judge issues a temporary injunction to block Microsoft's award of the $10 billion JEDI cloud contract by the U.S. Department of Defense. (Pixabay)

The brawl between Microsoft and Amazon entered a new round on Thursday when a U.S. judge granted a preliminary injunction to temporarily pause Microsoft from working on the $10 billion JEDI contract.

According to a story by Reuters, Judge Patricia Campbell-Smith issued the injunction to stop Microsoft from working on the Joint Enterprise Defense Infrastructure (JEDI) cloud contract, which was awarded to Microsoft on Oct. 25 despite Amazon being considered the frontrunner.

Campbell didn't release her written opinion, and she also ordered Amazon to post $42 million in the event that the injunction was wrongly issued, according to Reuters. Amazon is required to file a notice with the courts indicating it has obtained the $42 million by Feb. 20. Microsoft and Amazon must respond to the filing by Feb. 27.

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“While we are disappointed with the additional delay we believe that we will ultimately be able to move forward with the work to make sure those who serve our country can access the new technology they urgently require," Frank Shaw, Microsoft’s corporate vice president of communications, said in a statement to CNBC. "We have confidence in the Department of Defense, and we believe the facts will show they ran a detailed, thorough and fair process in determining the needs of the warfighter were best met by Microsoft.”

Amazon has called on the U.S. Defense Department to terminate the award and conduct another review of the submitted proposals.

The JEDI contract has been a knock down, drag out affair between Amazon Web Services (AWS), Microsoft, IBM and Oracle. The JEDI contract was supposed to be awarded in September of 2018, but some of the competing companies contended that Amazon had an unfair advantage. The process was slowed after several investigations and legal battles.

In November, Amazon filed a notice in the U.S. Court of Federal Claims that said it planned to contest the Pentagon's decision to give Microsoft the cloud-computing contract. When the decision was first announced that Microsoft had won the contract, Amazon said in a statement that it was "the clear leader in cloud computing, and a detailed assessment purely on the comparative offerings clearly led to a different conclusion."

On Wednesday, Amazon filed a motion that sought to pause Microsoft's work on the JEDI contract until a court ruled on its protest of how it was awarded. Amazon asked the U.S. Court of Federal Claims to allow it to depose President Donald Trump, Defense Secretary Mark Esper, former Defense Secretary John Mattis and Pentagon Chief Information Officer Dana Deasy about the decision to award the JEDI contract to Microsoft.

Amazon said in its filing, which was made public Monday, that the additional interviews were necessary because there is "concrete evidence of bias and bad faith" in the bid process, according to Bloomberg.

Amazon has contended that President Trump's dislike of Amazon CEO and Washington Post owner Jeff Bezos played a role in Microsoft winning the contract. Trump tipped his hand that he was following the contract process in July when he said to reporters that he "never had something where more people are complaining." Trump cited complaints by Microsoft, Oracle and IBM. IBM and Oracle were previously eliminated from the contract process, which they both protested, but lost, in court.

After becoming secretary of defense in July, Esper started reviewing the JEDI contract in August. Citing his son's work at IBM, Esper removed himself from the review of the Pentagon's JEDI cloud-computing contract in October prior to it being awarded.

After Microsoft was announced as the winner, Esper, Deasy and the Pentagon defended the decision to award the contract to Microsoft.

RELATED: Amazon files motion to stop Microsoft from working on $10 billion JEDI cloud contract

In January, Amazon filed a motion that sought to pause Microsoft's work on the cloud contract until a court ruled on its protest of how it was awarded. In December, Microsoft President Brad Smith said on CNBC that work on JEDI continues despite Amazon’s protest.

In its fourth quarter earnings report earlier this month, AWS reported $9.95 billion in sales, which was a 34% increase compared to the same quarter a year ago. In January, Microsoft reported that Azure's revenue grew by 62%, which was a sequential increase over 59% in the prior quarter. Microsoft doesn't breakout Azure's revenues.

According to a report by Synergy Research Group (SRG), AWS had 33% of the market share at the end of the fourth quarter followed by Microsoft (18%) and Google (8%).

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