Amazon (AMZN) seeks approval in federal court to move ahead with a large contract with the CIA....


Amazon (AMZN) seeks approval in federal court to move ahead with a large contract with the CIA. The cloud computing contract has been in dispute since IBM pitched a fit earlier this year over losing out on the deal estimated to be worth around $600M.

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  • Technology Equity Strategies
    , contributor
    Comments (3052) | Send Message
     
    Welcome to the world of government contracting, JB. Welcome to the intense competition, followed by more intense competition, followed by long administrative battles and litigation. Followed by lengthy contracts where price is locked in even though your estimates of costs turned out to be too low. Welcome to percentage of completion accounting. Which results in profit based on estimates, then writeoffs based on reality.

     

    Welcome to competing with companies like CSC and EDS (sold to HP for 5 times ebitda, dragging down HP ever since). Welcome to the lowest, least profitable, most capital intensive rung in the technology market. Even IBM doesnt make any real money on services. EDS, chronically unprofitable. CSC: 6 billion market cap on 16 billion in revenue.

     

    Welcome to the worst market of all tech. Periodically you get a stock market bloom in this kind of asset, until the cold hard light of day is shined on the business model. Amazon's concealment of the financial performance of this segment, in violation of all rules of segment accounting, now help make this transitional overvaluation possible. But once its visible and settles out, good luck with that.
    25 Jul 2013, 11:36 AM Reply Like
  • Technology Equity Strategies
    , contributor
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    By the way, this contract is Exhibit A of the proof that big enterprises and governments will not put their key data on Amazon's public cloud. Amazon has to go build a private cloud for them, which makes them just another outsourcer like everyone else. It will also be used by those entities as a precedent for not trusting the public cloud. Basicly a fundamental flaw in the AWS model is proven by this structure. Sure, enterprises will use the public cloud infrastructure for test and development functions. But lets wait and see if Amazon can get a bank to use the public cloud for anything important. Good luck with that.
    25 Jul 2013, 11:44 AM Reply Like
  • Gary J
    , contributor
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    Data does not get much more sensitive than that of the CIA. So much for "proof".
    26 Jul 2013, 07:22 AM Reply Like
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