U.S. Defense Department reaffirms $10 billion cloud deal to Microsoft

The Force appears to be finally with Microsoft Corp. in its epic duel with Amazon.com Inc. for JEDI.

The Department of Defense on Friday said it has completed its re-evaluation of the hotly-contested $10 billion cloud-computing deal and reaffirmed its award to Microsoft. “Microsoft’s proposal continues to represent the best value to the government,” the DoD said in a statement.

“The JEDI Cloud contract is a firm-fixed-price, indefinite-delivery/indefinite-quantity contract that will make a full range of cloud computing services available to the DoD,” the statement continued. “While contract performance will not begin immediately due to the Preliminary Injunction Order issued by the Court of Federal Claims on February 13, 2020, DoD is eager to begin delivering this capability to our men and women in uniform.”

The announcement came shortly before the markets closed. In another brutal day for tech stocks Friday, shares of Microsoft

dropped 1.4% in trading; Amazon

shares declined 2.2%.

“We appreciate that after careful review, the DoD confirmed that we offered the right technology and the best value. We’re ready to get to work and make sure that those who serve our country have access to this much needed technology,” a Microsoft spokesperson told MarketWatch.

Amazon vowed to “protest this politically corrupted contract award” in a strongly worded blog post.

“[Amazon Web Services] remains deeply concerned that the JEDI contract award creates a dangerous precedent that threatens the integrity of the federal procurement system and the ability of our nation’s warfighters and civil servants to access the best possible technologies,” Amazon said. “Others have raised similar concerns around a growing trend where defense officials act based on a desire to please the President, rather than do what’s right.”

“This was illustrated by the refusal to cooperate with the DoD Inspector General, which sought to investigate allegations that the President interfered in the JEDI procurement in order to steer the award away from AWS,” Amazon continued. “Instead of cooperating, the White House exerted a ‘presidential communications privilege’ that resulted in senior DoD officials not answering questions about JEDI communications between the White House and DoD. This begs the question, what do they have to hide?”

The Defense Department’s Joint Enterprise Defense Infrastructure (JEDI) cloud-computing deal over 10 years is considered a plum government contract. The Pentagon initially awarded JEDI to Microsoft in October over the objections of co-finalist Amazon, which filed suit in protest in November. In April, a federal judge gave the Pentagon permission to reevaluate bids from Microsoft and Amazon.

Read more: Amazon files suit, challenging Pentagon’s $10 billion cloud contract to Microsoft

Anticipating a win, Microsoft has been signing similar deals with foreign governments for cloud-infrastructure services, according to a report by CNBC last month.

For years, Microsoft and co-finalist Amazon have engaged in behind-the-scenes lobbying and subterfuge over the deal as they battle for supremacy in the cloud market. And at times, the competition has taken on almost a cartoonish quality, evoking Mad magazine’s Spy vs. Spy comic strip.

Adding to the political intrigue is the future of TikTok, a video-sharing social networking service owned by ByteDance, a Beijing-based Internet company. Microsoft is the leading candidate to acquire TikTok, though Oracle Corp.

and Twitter Inc.

have also been mentioned as suitors. Alphabet Inc.’s


Google was part of a group that explored a bid before dropping the idea, according to a Bloomberg report.

Microsoft is believed to be the favorite to acquire TikTok, published reports suggest, because it has been in close contact with the Trump administration. The software giant was initially awarded JEDI in October because of the president’s disdain for Amazon Chief Executive Jeff Bezos, who also owns the Trump-baiting Washington Post, say two people closely aligned to Amazon who are not authorized to speak publicly on the matter.

Amazon Web Services commanded 47% of the cloud infrastructure market in 2019, while Microsoft had 13%, according to estimates from market researcher IDC.

“This is a game changer for Microsoft as JEDI will have a ripple effect for the company’s cloud business for years to come, and speaks to a new chapter of Redmond winning in the cloud vs. Amazon in our opinion on the next $1 trillion of cloud spending expected to happen over the next decade,” Wedbush Securities analyst Daniel Ives said in a note late Friday.

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TikTok, WeChat highlight broader high-tech antitrust issues

Isopix/Zuma Press

President Donald Trump’s decision to ban individuals and businesses under U.S. jurisdiction from doing business with TikTok and WeChat is hardly provocative. However, it casts a light on an emerging antitrust problem—the privatization and manipulation of the public square by technology companies.

China’s Great Firewall blocks Facebook

and similar U.S. services. This has permitted ByteDance, Tencent


and others to develop social media platforms such as TikTok and WeChat and other internet businesses in a large protected domestic market and compete in the United States and elsewhere.

WeChat is a platform for messaging, marketing, shopping and payments more comprehensive than anything we have here. Hence, the ban will limit the ability of Chinese in the United States to communicate with family at home and elsewhere, and U.S. companies like Walmart and Starbucks may have to place greater emphasis on other vehicles to market in China.

Instead of complaining these restrictions illustrate U.S. efforts to stifle Chinese high tech, President Xi Jinping should be thankful his innovators benefited from a protected market to develop businesses like Alipay and Alibaba

The U.S. regulatory and antitrust focus on Big Tech has centered on how Amazon
Facebook, Google

and others gather information about our behavior to sell ads and market ideas. And the advantages their dominant platforms potentially afford over present and potential rivals.

Amazon, for example, learns from the activities of businesses selling on Prime to develop competing products. In businesses like disposable diapers, it has been accused of predatory pricing and muscling collaboration with smaller businesses to obtain critical competitive information.

We need to be careful. While Amazon had its beginnings in the direct sale of books printed by big publishing houses, it has created a remarkable self- publishing platform through Kindle that permits authors to bypass the cultural screening of those publishers.

App developers can effectively market to iPhone users only through its App Store. Apple skims an eye popping 30% of initial sales but accounts for only 13% of global smartphone sales. Apple and Google’s Android create preferences for their own or third-party products over others.

These practices may warrant regulation to promote competition and innovation. However, without these companies, we would still be texting and surfing on narrow screens on flip phones and Blackberries. Without Amazon, the development of cloud services would have been left to slower-moving legacy techs like Microsoft

and IBM

The Trump administration’s principal concern with TikTok is the vast amount of data it possesses about American users that the Chinese government could exploit to blackmail Americans or to spread propaganda.

TikTok’s primary servers are in Virginia with backups in Singapore—theoretically beyond the reach of Beijing. However, updates and algorithms that determine what users see and is censored are developed in China. Anonymized information is plenty good enough for Beijing to manipulate what U.S. users view about Beijing’s treatment of Muslims, policies in Tibet, the crackdown on Hong Kong or an American presidential election.

Our tech companies and other businesses are under intense pressure from the organized left—directly through boycotts like those afflicting Facebook and the Washington NFL franchise—and indirectly from investment banks and major corporations that now set themselves up as arbiters of acceptable free speech and political correctness—to screen, limit and censor what we see, the language we use and generally how we do business.

The Chinese government has long done similar things through WeChat. Communications between American users and China and the rest of the world are filtered, and Beijing pushes its propaganda on the app.

Big Tech is broadly accused of an anticonservative bias. In an era where individuals and organizations express their ideas, discontent and praise online, free speech and access to all sides of an issue are perceived threatened on platforms like Twitter and Facebook.

The Constitution protects freedom of speech from governments, not private censorship but those platforms and others have become the public square equivalent of an essential facility in antitrust law—when a monopolist controls choke points in commerce, like a rail crossing, it is often compelled to share access on fair terms.

Just as the United States should fence out TikTok, WeChat and others to protect Americans from Chinese censorship and subversion, the Justice Department, FTC and European antitrust authorities should be coming down on big tech for using their monopoly power to abridge freedom of speech.

Peter Morici is an economist and emeritus business professor at the University of Maryland.

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New Zealand exchange halts trading for 4th straight day after multiple cyberattacks

New Zealand’s NZX exchange has been targeted by DDoS attacks four days this week.

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New Zealand’s stock exchange halted trading for a fourth day in a row Friday due to multiple cyberattacks.

“We are currently experiencing connectivity issues which appear similar to those caused by severe DDoS attacks from offshore this week,” Wellington-based exchange operator NZX Ltd.

said in a statement. NZX’s website was down as well. DDoS, or distributed denial-of-service, attacks overwhelm a targeted server or network with traffic.

ZDNet.com reported a global criminal syndicate is behind the attacks, which are part of a global campaign to extort bitcoin from some of the world’s largest financial and e-commerce companies. PayPal

and its Venmo service have also been targeted, ZDNet said, along with MoneyGram
YesBank India, Worldpay and Braintree.

The hackers are reportedly the same as those identified by Akamai Technologies Inc.

in an alert earlier this week, who are sending ransom letters demanding bitcoin to companies in the U.S., U.K. and Asia-Pacific region. The hackers reportedly claim to be from the  Armada Collective and Fancy Bear groups, but it is believed they are not actually affiliated with those notorious hacker organizations.

NZX is working with its internet service provider, as well as cybersecurity partners and New Zealand’s national security bureau, the New Zealand Herald reported.

The repeated interruptions in service have raised serious concerns about the exchange’s security, and raised fears that the cyberattacks could be the prelude to moves against larger global exchanges.

Professor Dave Parry of Auckland University of Technology’s department of computer science told New Zealand news service Newshub that it was “a very serious attack on critical infrastructure in New Zealand,” and “indicates a level of sophistication and determination which is relatively rare.”

Before trading was stopped, New Zealand’s NZX-50 index

was closing in on its all-time record high of 12,073.34, set in February.

Separately, a DDoS-bitcoin extortion scheme at Tesla Inc.’s

Nevada gigafactory was apparently thwarted by the FBI earlier this month, and a Russian national arrested in the scheme.

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Bill.com beats on earnings, CEO predicts work-from-home trends are ‘here to stay’

Bill.com Holdings Inc. Chief Executive René Lacerte is optimistic that the COVID-19 crisis will drive a longer-term shift toward remote work that increases demand for digital accounting tools.

The company already saw signs of those trends in its recently ended fiscal fourth quarter, as it added 6,700 net new customers, gains it attributed in part to a greater need to manage billing operations remotely during the pandemic. Bill.com

targets small- and medium-sized businesses through software products meant to replace the many manual processes involved in traditional corporate accounting.

Watch: How 5G promises to enable a fully remote workforce

Lacerte expects that working from home “is here to stay” and that the dynamics pushing small-business customers to try Bill.com’s offerings because their back-office teams can’t make it into the workplace during the pandemic will persist even after the crisis is over.

“We are seeing that COVID has been an accelerant to how people think about their work,” he told MarketWatch.

Lacerte said that challenges with the U.S. Postal Service might also be something that businesses are thinking about, noting that he grew up in an entrepreneurial family and knows that those running businesses “worry about paying suppliers on time.” Cost cuts at the Postal Service have led to mail delays.

Though Bill.com topped revenue and earnings expectations for its latest quarter, shares were off about 4% in after-hours trading.

The company reported fiscal fourth-quarter revenue of $42.1 million, up from $31.7 million a year earlier and ahead of the FactSet consensus, which called for $38 million.

Bill.com posted a net loss of $9.5 million, or 13 cents a share, compared with a loss of $4.5 million, or 56 cents a share, in the year-earlier quarter. On an adjusted basis, Bill.com lost 2 cents a share, compared with a loss of 2 cents a share a year prior. Analysts surveyed by FactSet were modeling an adjusted loss of 11 cents a share.

Jefferies analyst Samad Samana was most struck by the company’s disclosure of $152 million in remaining performance obligations with financial institutions to be recognized as revenue. This was up from $44 million in the March quarter, and while most of the increase in performance obligations are expected to be recognized more than a year out, Samana said in a note to clients that the traction here is “representative of the new and recent expansions with major [financial institutions].”

Bill.com highlighted in its earnings release an expanded agreement with one of the top three small-business banks in the U.S. “For them to say this is going to be the default solution for payments, for them to make this commitment to us is significant,” Lacerte told MarketWatch.

He said that the increase in performance obligations “is a testament to the platform we have build and the confidence partners have in the ability to digitally transform their lives.”

Samana also highlighted the company’s annual customer retention rate of 82%, in line with the company’s March rate. “This impressive result quelled fears of higher churn and demonstrates the stickiness of Bill.com’s solutions with end customers,” he wrote, while maintaining a hold rating but boosting his price target to $110 from $98.

Shares have gained 65% over the past three months as the S&P 500

has risen 15%.

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U.S. TikTok CEO Kevin Mayer resigns, saying ‘the political environment has sharply changed’

Just three months after taking the job, TikTok Chief Executive Officer Kevin Mayer announced his resignation in an internal memo to employees late Thursday, where he spoke of a changing political landscape.

“In recent weeks, as the political environment has sharply changed, I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for. Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company.”

— Kevin Mayer, outgoing CEO of TikTok

Mayer’s announcement comes amid intense pressure for the wildly popular app, which President Donald Trump has vowed he will ban in the U.S. unless parent company Beijing-based ByteDance Inc. sells it within 90 days.

Mayer said his decision had “nothing to do with the company, what I see for our future, or the belief I have in what we are building.” He added that the chairman of ByteDance, Zhang Yiming, understood and support his decision.

The outgoing CEO said he remains upbeat on the company’s future, which he described as ”incredibly bright.” A spokesperson from the company said that Vanessa Pappas, general manager for TikTok U.S., will be the interim head.

Mayer said any potential structural changes should not affect the experience of users — 100 million in the U.S. — and the platform “will continue to provide our global community an amazing and integrated experience as it does today.”

He joined TikTok in May, after a stint in charge of Walt Disney Co’s

streaming service.

TikTok announced Monday that it would file a complaint in federal court over Trump’s attempt to ban the service in the U.S., arguing that it has “taken extraordinary measures to protect the privacy and security of TikTok’s U.S. user data.” The company claims U.S. data is stored outside of China, while “software barriers” help ensure it’s stored separately from that of other ByteDance products.

Software giant Microsoft Corp.

has indicated it may be interested in buying TikTok’s U.S. operations, while Oracle

and Twitter

have also reportedly expressed interest.

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