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Amazon responds to Google's cloud cuts, gets DoD approval

  • Surprise, surprise: Amazon Web Services (AMZN -3.2%) has barely waited 24 hours to respond to Google's huge cloud infrastructure/app platform price cuts. AWS' cuts are the 42nd in its history.
  • Prices for popular options for Amazon's EC2 cloud computing service have been lowered by 30% or more, and prices for its S3 storage service have been cut by an average of 51%. Its RDS database service is seeing a 28% cut on average, and its Elasticache caching service a 34% price drop.
  • Prior to Amazon's move, cloud analytics firm RightScale pointed out Google's cuts made its computing services much cheaper than Amazon's in many (but not all) cases. RightScale also observed Google is guaranteeing future cuts will be automatically passed on to those making reserved instance commitments, something not the case with Amazon.
  • AWS is also: 1) Announcing it has received DoD certification. Amazon already has FedRAMP government clearance, and is building a private cloud for the CIA after fending off an IBM protest.  2) Making its WorkSpaces PC virtualization solution (announced last fall) generally available. 3) Rolling out a new server instance (called R3) that supports up to 244GB of RAM and SSDs.
  • Amazon's "Other" North American revenue, dominated by AWS, rose 58% in 2013 to $3.7B. The company joined other Internet stocks in selling off today.
Comments (12)
  • Andrei Volgin
    , contributor
    Comments (584) | Send Message
     
    This is a big hit to Amazon's bottom line. These cuts will shave off hundreds of millions of dollars from Amazon's revenues this year.

     

    It appears that Google decided to price AWS out of existence. Amazon already faces liquidity issues, because the company does not generate enough cash to support its growth. Now lower prices will bring more computing volumes to both AWS and Google, which means large investments in new data centers. Where will Amazon get the capital for all these investments, and for all the other initiatives that it is working on?
    26 Mar, 05:10 PM Reply Like
  • ReligiousWacko
    , contributor
    Comments (831) | Send Message
     
    Sell stock before bubble completely implodes...
    26 Mar, 09:11 PM Reply Like
  • Zipper0
    , contributor
    Comments (310) | Send Message
     
    Goog's capex increased from $3.3 to $7.4 bil. in the last year alone. $7.4 bil. is 60% of Goog's net income for 2013. Next year, Google will have put 100% of its high-margin advertising profits into its new low-margin, capital-intensive cloud computing business in a race to the commoditized bottom with Amazon. Woohoo! It's a grand day for GOOG and AMZN shorts alike!
    26 Mar, 10:10 PM Reply Like
  • Johnwoods41
    , contributor
    Comments (99) | Send Message
     
    They have no pricing power at all. Investors who believe that one day they can raise prices on anything they sell are misguided. They own or create nothing unique and do not deserve the valuation the market has put on them. They had first mover advantgage in AWS and in their online retail platform, but others are learning fast.
    26 Mar, 06:49 PM Reply Like
  • youngdub774
    , contributor
    Comments (36) | Send Message
     
    Amazon loves racing to the bottom
    26 Mar, 06:55 PM Reply Like
  • SoCalNative
    , contributor
    Comments (422) | Send Message
     
    Paging Mr. Paulo Santos....
    26 Mar, 07:02 PM Reply Like
  • Derek A. Barrett
    , contributor
    Comments (3534) | Send Message
     
    Azure is a better solution than either of them

     

    Just sayin...
    26 Mar, 08:42 PM Reply Like
  • ReligiousWacko
    , contributor
    Comments (831) | Send Message
     
    So could total AWS revenue actually DECREASE this year?
    Of course, lets not even talk about profits ....
    26 Mar, 09:54 PM Reply Like
  • MarketLost
    , contributor
    Comments (808) | Send Message
     
    Hands up who didn't see this coming.

     

    I was always amazed to see how many people cited AWS as a means for massive earning potential at Amazon. I thought it was rather obvious that the space was going to get competitive quick, and that Google, MSFT and others would start an all-out pricing war. We've seen this so many times in tech that you can set your watch to it.
    26 Mar, 09:59 PM Reply Like
  • SyrPhil
    , contributor
    Comments (29) | Send Message
     
    Where is Mr. Gary J?
    27 Mar, 02:49 AM Reply Like
  • MarketLost
    , contributor
    Comments (808) | Send Message
     
    @SyrPhil, he's busy golfing, and buying a Bimmer. ;-)
    27 Mar, 04:36 PM Reply Like
  • adam_hartung
    , contributor
    Comments (131) | Send Message
     
    Amazon's actions will keep it in the lead, and make it ever tougher for late entry Microsoft to make any market share progress with Azure http://onforb.es/1jxIaP2
    1 Apr, 06:07 PM Reply Like
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