Microsoft Discounts Cloud Services Challenging Amazon

Microsoft Corp. (MSFT) unveiled price cuts for Web services, seeking to catch up to market-leader Amazon.com Inc. (AMZN) in cloud computing.

Starting Nov. 1, Microsoft will offer discounts for its Windows Azure cloud service, as well as annual payment plans for customers signing long-term contracts, said Satya Nadella, Microsoft’s cloud and enterprise chief who has been named as a possible replacement for retiring Chief Executive Officer Steve Ballmer.

The world’s largest software maker has pledged to match its rival’s prices for public-cloud products that let customers store and run applications via the Internet. Amazon, whose Web Services unit was the early entrant, is more than five times bigger than rival providers combined, when measured by cloud-computing capacity usage, according to researcher Gartner Inc.

“Microsoft has really done a pretty good job over the past several years bridging the gap to the high-growth cloud market, both on the consumer and enterprise fronts,” said Josh Olson, an analyst at Edward Jones & Co. “We expect Microsoft will continue to invest aggressively in cloud and remain competitive in the market, and this pricing announcement is reflective of that.”

Nadella also introduced a version of Azure for U.S. government customers, which will store data in the U.S. and be managed by Americans to meet government-security requirements.

Web Services

Microsoft excels at combining several kinds of cloud software and programs stored on a customer’s own servers, he said at an event in San Francisco yesterday.

“It takes someone to really stitch these things together,” he said at the event. “Clearly, Amazon has done a good job in getting out there early. Azure, I would say, is No. 2.”

Ballmer announced his plan to retire from Redmond, Washington-based Microsoft within 12 months in August and the company’s board is currently looking at internal and external candidates to succeed him. Nadella was among the internal candidates considered, a person with knowledge of the matter said in August.

At the event, Nadella declined to discuss the CEO search and said Ballmer remains “very much the CEO today.”

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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