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Digest

Amazon says it will keep cutting prices, pressuring Microsoft

Source: Washington Post
March 15, 2012
Amazon.com Inc., which dropped prices on its Internet-based cloud-computing service last week, said it will keep cutting when it can, putting pressure on competitors like Microsoft Corp. to keep its own prices low.

Customers of Amazon’s EC2 service, which lets clients run their programs on the online retailer’s server computers, saw price cuts of as much as 37 percent on March 5, and other Amazon cloud service prices were trimmed as well. Microsoft responded days later with reductions on its rival Azure services.

“We expect prices to be lower and lower over time, and load volumes to be higher and higher,” said Adam Selipsky, a vice president at Amazon Web Services. Amazon has lowered prices 19 times in the 6 years it has sold Amazon Web Services, which has gained customers as more companies seek to run and store applications in outside data centers instead of maintaining the servers themselves.

As they tussle over price, the resulting narrower profit margins may be tough to swallow for both companies. Microsoft is under pressure from investors concerned about its entry into markets where costs are higher than its traditional software business. Meanwhile, Amazon’s stock has slid about 25 percent from a record in October as expanded investments in areas such as cloud services and the Kindle Fire tablet halved margins in 2011.

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