Microsoft Slashes Azure Pricing; Follows Amazon in a Race to the Bottom

+3.23%
Upside
454
Market
468
Trefis
MSFT: Microsoft logo
MSFT
Microsoft

Microsoft (NASDAQ:MSFT) offers Azure as a cloud computing platform for developers enabling them to build, host and easily scale web applications using Microsoft’s data centers. It competes primarily with Amazon (NASDAQ:AMZN) Web Services, which is the largest player in the cloud computing space, Google (NASDAQ:GOOG) App Engine, offerings like Heroku and Force.com by Salesforce.com (NYSE:CRM) and Rackspace.

Microsoft has slashed its pricing for Azure storage and computing instances in a bid to stay competitive with Amazon, which recently reduced the pricing for many of its web services like Elastic Computing Cloud (EC2), Elastic Map Reduce (EMR), and Relational Database Service (RDS). [1]

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Azure is an important part of Microsoft’s Servers and Tools business

In response to Amazon’s price cuts, Microsoft reduced prices for its similar offerings – Azure Storage and Azure Compute. Both Microsoft and Amazon are targeting small businesses, developers and start-ups with their services. We expect revenue from Azure cloud services to grow steadily in the coming years and account for an increasing portion of Microsoft’s revenue from the Servers and Tools business.

Azure Storage, Compute and SQL are part of the Servers and Tools business, which accounts for around 17% of Microsoft’s total value.

Microsoft’s $38 Trefis price estimate stands nearly 15% above its market price.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Cloud’s price race to zero: Microsoft cuts Azure pricing, eyes Amazon, ZDNet []