A 10-year, $600 million contract awarded by the Central Intelligence Agency could provide Amazon.com (NASDAQ:AMZN) stock with a big boost, pitting its web services division against more traditional providers like IBM (NYSE:IBM) and Hewlett-Packard (NYSE:HPQ).
As The Wall Street Journal reported the other day, Amazon believes government contracts will be a lucrative endeavor for its cloud-computing unit and the division's vice president, Adam Selipsky, was reported saying: "The federal government opportunity is enormous. We believe that will be a very significant business for Amazon Web Services going forward."
In light of the snooping scandal involving the CIA's PRISM program, which collects and monitors virtually all electronic communications of the American people, the question is: Will the markets tolerate Amazon getting into bed with the spies?
When China developed its so-called Golden Shield project that used technology to monitor, censor, and otherwise contain its citizens, U.S. companies that helped the government develop the program rightly came in for criticism. Cisco (NASDAQ: CSCO) provided the networking equipment critical to operating the vast, complicated surveillance system that was installed. Honeywell (NYSE: HON), United Technologies (NYSE: UTX), General Electric (NYSE: GE), and IBM were all there providing the repressive regime with the technology and know-how to keep its citizens in check.
How much more will the public look askance at these tech giants when the tools they are providing are not to foreign governments but to our own and the people being spied upon are Americans?
Where the tech companies might normally resist such overtures, resistance is being overcome by lavishing billions of dollars on the corporations that do succumb. The Journal reports that the Defense Dept. spent about $35 billion on information technology systems last year, down from $38 billion a few years ago but still a prodigious amount that is causing Amazon to now go up against IBM.
A few years ago, I noted how creepy it was that the CIA was running its own venture capital firm, In-Q-Tel, named in part after the master spy gadget maker Q from the James Bond movies. While my fears were partially assuaged at the time by the fact that they were supposedly targeting terrorists, it seems the spooks were all too willing to turn those tools on U.S. citizens.
The cloud-based services the CIA and its National Security Agency are using to collect and collate data on private individuals should be alarming, and investors ought to hold accountable not only the politicians who allow the program to exist but the companies that facilitate its creation.
Of course, as I noted the other day on the dark side of big data, investors have short memories so that even if they do get spooked by this latest episode by the spymasters, they'll soon be back bidding up its shares.
The greater threat seems to be the General Accountability Office recommending the web services contract be rebid. With two months to decide, the CIA could indeed be the one that ends up spooking Amazon's stock.
Fool contributor Rich Duprey owns shares of General Electric and Cisco Systems. The Motley Fool recommends Amazon.com and Cisco Systems. It owns shares of Amazon.com, General Electric, and IBM. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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