October 28, 2019 / 8:20 PM / 16 days ago

Breakingviews - How to hit a U.S. tech billionaire where it hurts

Jeff Bezos, founder of Blue Origin and CEO of Amazon, speaks about the future plans of Blue Origin during an address to attendees at Access Intelligence's SATELLITE 2017 conference in Washington, U.S., March 7, 2017. REUTERS/Joshua Roberts

SAN FRANCISCO (Reuters Breakingviews) - For a tech billionaire, the one thing worse than attracting the attention of the White House may be seeing that attention go elsewhere. Jeff Bezos’ Amazon lost out to Microsoft on a $10 billion defense contract in which President Donald Trump, a frequent critic, had threatened to intervene. Trump’s wrath has limits, but reverse favoritism is a risk when government money is up for grabs.

Chief executives of all stripes have had to be extra cautious during the Trump presidency. Silicon Valley bosses have been particularly vulnerable because of growing criticism by the commander-in-chief of perceived anti-conservative bias on their online platforms. Amazon is a target because Bezos personally owns the Washington Post, a regular recipient of Trump’s tongue lashings.

The president is constrained in the harm he can do. Regulators that answer to him have launched an antitrust probe into big tech companies, including Amazon, which could result in business restrictions, at the very least. But a final outcome is likely years away. In the meantime, Amazon’s sales continue to rise. Last week, it reported a 24% year-on-year revenue increase in the third quarter.

The coveted Pentagon contract shows where Trump has influence. Government procurement is big business; information technology spend could amount to nearly $90 billion in the 2020 fiscal year. Amazon, which has taken business from rivals like Oracle, was a leading bidder for the Defense Department cloud-computing contract when in the summer, Trump raised the idea of wading in to address complaints by Bezos’ rivals.

Microsoft may be a safe pair of hands too, but the award of the contract, announced on Friday night, calls up questions. A new book by an aide to former Defense Secretary Jim Mattis, who left government last year, reveals Trump told the former general to “screw Amazon” out of the Joint Enterprise Defense Infrastructure project, or JEDI for short.

It’s a warning for other companies vying for government business. Amazon’s cloud revenue in the third quarter already disappointed investors. Tech moguls who own media outlets are particularly exposed. Trump is an avid reader of Time magazine, for example, co-owned by Marc Benioff, whose firm Salesforce also serves government agencies. Making an enemy of the president is riskier when he’s also a customer.

Breakingviews

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