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One area where Trump could really hurt Amazon

Myles Udland
Markets Reporter

President Donald Trump has made no secret of the fact that he does not care for Amazon (AMZN) or its CEO and founder Jeff Bezos.

On Thursday, Trump tweeted that, “I have stated my concerns with Amazon long before the Election. Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”

Trump’s comments Thursday followed a Wednesday report from Axios which found the president is fixated on finding ways to regulate Amazon while most lawmakers are turning their gaze towards Facebook (FB), Twitter (TWTR), and Google (GOOGL) over their uses and handling of user data.

And these comments also track a long-running feud between Trump and Bezos, which has included Trump calling The Washington Post — which Bezos owns through his personal investment vehicle — “fake news” and a “lobbyist for Amazon,” among other criticisms of both companies.

But while regulating Amazon from an anti-trust position by arguing that its retail business is uncompetitive may appear to be outside the current political appetite from DC lawmakers, there is an area of Amazon’s business that Trump could directly, and negatively, impact with haste — Department of Defense contracts.

U.S. President Donald Trump departs the White House for a trip to Cleveland, Ohio, in Washington D.C., U.S., March 29, 2018. REUTERS/Carlos Barria

“Our overall view remains that Alphabet and Facebook have direct regulatory issues in front of them,” writes Dan Clifton, an analyst at Strategas. “Amazon remains a political target, but is more difficult to regulate. The issue to watch with Amazon in the short run is a movement against the company receiving the sole award for cloud computing contracts for the Department of Defense.”

Amazon’s potential DoD windfall

Back in February, a company called REAN Cloud, which an Amazon Web Services consulting partner and reseller, was awarded a $950 million contract from the DoD to help with the Department’s work moving its tech infrastructure to the cloud. As The Washington Post reported at the time, this award stoked fears among some Amazon cloud competitors that it would be the sole company awarded the massive, grand-prize contract to provide cloud services to the DoD.

The Washington Business Journal reported that the omnibus spending bill signed by Trump earlier this month contained a provision which requires the DoD to explain why awarding a contract that could run in excess of $10 billion to a single vendor is the best way to execute this plan.

In 2013, Amazon Web Services won a $600 million contract from the CIA.

And with signs pointing to Amazon having the upper hand in winning a potentially massive contract from the DoD, Clifton sees this as an area where Trump could hit back against Amazon.

“Of all the stories we read [on Wednesday], however, we saw very little attention paid to the one area where Trump could actually hurt Amazon cloud computing contracts,” Clifton writes. “Tech companies have been fuming at the possibility of Amazon being the sole company awarded a multi-year cloud services contract at DoD. Congress was forced to intervene in the recent omnibus.”

Clifton adds that, “We believe other tech companies are largely funding [negative ads] to bring attention to the fact that Amazon is about to receive a windfall from the Trump Administration and one that will allow it to squeeze out the other tech companies.”

Amazon’s cloud business pulled in $17.5 billion in revenue in 2017 and earned the company $4.33 billion in profit, more than the $4.1 billion the company made as a whole. And if Amazon’s tech rivals get Trump’s attention on a potential multi-billion dollar Defense award seemingly destined for Amazon, the President could have an opening to hit his favorite target in its most profitable business unit.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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