Microsoft Corporation Joins The Cloud Price War

Microsoft announces pricing cuts throughout its cloud computing services, following similar moves from Google and Amazon last week. Infrastructure-as-a-Service is becoming a race to the bottom.

Evan Niu
Evan Niu, CFA and Erin Kennedy
Apr 1, 2014 at 8:00PM
Technology and Telecom

Last week, Google (NASDAQ:GOOGL) began something of a price war in its cloud computing business. Amazon.com (NASDAQ:AMZN) responded in kind, and now Microsoft (NASDAQ:MSFT) is joining in with price cuts. Should investors be worried about a race to the bottom crushing margins in this space? Infrastructure-as-a-Service businesses are quickly becoming commoditized, especially as hardware costs continue to fall dramatically.

These 3 heavyweights can afford to be aggressive though, as their cloud computing offerings are secondary to each of their respective core businesses. That represents a threat to larger diversified IT vendors like IBM (NYSE:IBM) as well as smaller pure-play companies like Rackspace Hosting (NYSE:RAX).

In this segment from Tuesday's Tech Teardown, host Erin Kennedy and Motley Fool tech and telecom bureau chief Evan Niu take a look at the increasingly commoditized cloud computing space, which of these competitors stand to win the most through aggressive price cutting strategies, and who in this space is most hurt by a race to the bottom.