Back to top

Image: Bigstock

Oracle (ORCL) JEDI Lawsuit Appeal Quashed by the Supreme Court

Read MoreHide Full Article

According to a Reuters report, Oracle’s (ORCL - Free Report) long-standing appeal against an unfair awarding of the $10-billion Joint Enterprise Defense Infrastructure (“JEDI”) cloud deal (now abandoned) by the Pentagon was quashed by the U.S. Supreme Court.

The U.S. Supreme court ruled that the company could not have qualified for the JEDI deal. As a result, it cannot have been affected by Pentagon’s awarding of the contract to Microsoft. Per Bloomberg, the government also defended that  Oracle’s appeal should not be entertained as it had become “legally moot.”

Oracle petitioned that the Supreme Court should not reject its appeal as the shortcomings in the earlier contract have a chance of resurfacing again as the Pentagon scouts for new bidders, per Reuters.

The JEDI cloud deal, which was floated by U.S. Department of Defense (“DoD”)  in 2018, has been mired in controversies ever since. Apart from Oracle, Amazon (AMZN - Free Report) also took legal recourse to challenge DoD’s decision of awarding the entire contract to Microsoft.

Oracle filed several lawsuits regarding the JEDI deal but repeatedly was rebuffed. In September 2020, Oracle faced a major setback when the U.S. Court of Appeals rejected its contention that the JEDI federal procurement process was unfair. In July 2019, the company’s claims of the JEDI cloud contract infringing on procurement laws was overturned by the Federal Claims Court.

 

JEDI Contract and Other Legal Entanglements

Microsoft was first awarded the JEDI contract by the Pentagon in October 2019. Amazon has strived to prevent Microsoft from working on the contract ever since. Amazon was granted a preliminary injunction order issued by the Court of Federal Claims on Feb 13, 2020, that did not permit the immediate commencement of the contract by Microsoft.

Amazon vehemently opposed the cloud contract being presented to Microsoft again in September 2020, following re-assessment of the submitted bids and called it a “dangerous precedent.”

The JEDI deal was scrapped by the DoD in July 2021. DoD stated that it was cancelling the JEDI contract as it “no longer meets its needs” owing to constant technological evolution, changing requirements as well as matured cloud conservancy.

DoD is  now planning to float a multi-cloud/multi-vendor Indefinite Delivery-Indefinite Quantity (IDIQ) contract — Joint Warfighter Cloud Capability (JWCC). DoD is looking toward Microsoft as well as Amazon for bids of the new contract as it finds these two cloud service providers (CSPs) competent enough to cater to the organization’s requirements.  DoD added that is continuing with its research to find whether any other CSP can meet its needs and will hold discussions if it finds such a vendor.

The deal was of immense importance to all the major cloud service providers (CSPs) due to the enviable $10-billion price tag. It was also important to CSPs as it would have further cemented their presence in the lucrative cloud space.

Oracle has also been endeavouring to augment its government services portfolio, despite its late entry in the cloud domain. According to a Mordor Intelligence report, the global government cloud market is expected to witness a CAGR of 17.4% between 2021 and 2026 and reach $59.74 billion. Higher expenditure on cloud infrastructure services offers alluring business prospects for CSPs.

Zacks Rank & Stocks to Consider

Currently, Oracle carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are HP Inc (HPQ - Free Report) and Avnet (AVT - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for HP Inc and Avnet is pegged at 8.2% and 25.4%, respectively.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Amazon.com, Inc. (AMZN) - free report >>

HP Inc. (HPQ) - free report >>

Avnet, Inc. (AVT) - free report >>

Oracle Corporation (ORCL) - free report >>

Published in