Oracle ORCL recently suffered a setback as Federal Claims Court ruled out the company’s claims that the U.S. Department of Defense’s (“DoD”) Joint Enterprise Defense Infrastructure (“JEDI”) cloud contract infringes on federal procurement laws.
Oracle had reportedly filed the lawsuit around December, 2018, alleging that the contract favors Amazon’s AMZN cloud computing platform, Amazon Web Services (AWS). Moreover, the company had also questioned the “unfair” single-winner criteria.
Per Bloomberg, Eric Bruggink, Federal Claims Court Senior Judge, said that Oracle failing to meet the required qualifying criteria to secure JEDI contact, “cannot demonstrate prejudice as a result of other possible errors in the procurement process.”
JEDI Deal Zeroes in on Azure & AWS, Irks Oracle
DoD, headquartered at Pentagon, intends to develop JEDI cloud by means of a 10-year contract estimated to be worth $10 billion.
The announcement which had surfaced around January 2018 intensified the cloud war. Concerns pertaining to President Trump’s anti-Amazon tweets or Oracle’s anxiety regarding the policies have been doing rounds since then.
However, Pentagon assured that the contract will be finalized in a fair and transparent manner.
Around April 2019, it was announced that Amazon and Microsoft MSFT are reportedly the only remaining contenders to secure the Pentagon’s JEDI cloud contract. According to sources, International Business Machines IBM and Oracle were out of contention for failing to meet the minimum criteria.
Notably, Google had willingly opted out from bidding for the JEDI deal citing value and ethics concerns.
Now, that Oracle has lost the legal battle at the Federal Claims Court, it remains to be seen whether it takes the matter to the Federal Court of Appeals. In that case, the closure of the contract with the announcement of a single winner might take longer time.
Key Takeaways: Will the Lawsuit Affect Oracle’s Business?
Oracle, has been striving to enhance government services portfolio, despite its late entry in the cloud market. Notable agencies, comprising Department of Finance, Abu Dhabi; New South Wales Department of Justice, among others, already leverage the company’s cloud solutions.
Moreover, Oracle reportedly sells maintenance licenses to the DOD which generates “millions of dollars” for the company.
As revealed by reports, the company’s spokesperson stated, “Oracle’s cloud infrastructure 2.0 provides significant performance and security capabilities over legacy cloud providers. We look forward to working with the Department of Defense, the Intelligence Community, and other public sector agencies to deploy modern, secure hyperscale cloud solutions that meet their needs.”
In this regard, it is important to note that, the fiscal 2019 defense budget of $716 billion — the largest allotted to defense in U.S. history — which is extremely lucrative. Out of the total tally, $686 billion is allotted to the DoD and $13.7 billion is proposed to be invested “in science and technology to further innovation.”
Further, per psmarketresearch data, the global government cloud services market is projected to hit $49.2 billion in 2023, at a CAGR of 15.4% between 2018 and 2023.
Increasing government spend on cloud infrastructure services, poses lucrative business opportunities for Oracle. In case the lawsuit is dragged further, there is likely a threat of losing out on business opportunities with DoD, which does not bode well for the company’s top line and might impact the stock performance.
Oracle currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Click to get this free report International Business Machines Corporation (IBM) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report Oracle Corporation (ORCL) : Free Stock Analysis Report To read this article on Zacks.com click here.