Apple-Alphabet Cloud Accord Could Help Google Catch Up With Amazon
Google-owner Alphabet ( GOOGL ) has snared iPhone maker Apple ( AAPL ) as a customer for its Google Cloud Platform, a deal that could help Google’s service catch up with industry leader Amazon.com ( AMZN ), says an industry note from Pacific Crest Securities on Thursday. Amazon unit Amazon Web Services (AWS) is now the biggest provider of infrastructure as a service (IaaS), where customers rent computer servers and data storage systems via the Internet. Microsoft ( MSFT ) and Alphabet’s Google rank next. Apple signed a contract worth between $400 million and $600 million to use Google’s Cloud Platform, according to CRN . Apple now uses cloud services from Amazon and Microsoft, but intends to end its reliance on all its rivals in the next few years, as it builds its own data centers, according to Re/Code. While Apple has reportedly used AWS historically for iCloud, “the more surprising shift is from Apple to Google, which are odd bedfellows given the two companies’ mudslinging and competition in other areas,” wrote Pacific Crest Securities analyst Evan Wilson. “Did Google throw in free cloud as a way to renegotiate the search contract? Definitely adds to the perception of Google’s momentum,” Wilson added. The deal has not been confirmed by Google or Apple, but Apple did disclose its reliance on AWS and on Microsoft’s Azure in a 2014 white paper. The alleged Apple-Google accord would help “Google Cloud Platform catch up to Amazon and Microsoft — at least in terms of perception — as a real third player in the space instead of a distant third. Google has done similar deals with Snapchat, PricewaterhouseCoopers, General Mills ( GIS ) Coca-Cola ( KO ), HTC and Best Buy ( BBY ),” said Wilson. In total, the cloud opportunity is big enough for all three Internet powerhouses, said Wilson, who estimated “a potential $25 billion windfall opportunity in cloud services for Amazon, Microsoft and Google, collectively.” While AWS has been the biggest IaaS price-cutter of the last decade, Google Cloud Platform (GCP) has been aggressive since moving into the market. Google slashed prices in March 2014, October 2014 and May-June 2015, Goldman analyst Heather Bellini said in an industry report last month. Goldman Sachs says that the top three service providers are gaining share as Verizon Communications ( VZ ), Hewlett Packard Enterprise ( HPE ) and others exit the public IaaS market and focus on private clouds. Goldman Sachs estimates that AWS’ revenue will hit $12.5 billion in 2016, up from $7.88 billion last year. Apple stock was down a fraction in midday trading in the stock market today , near 106. Alphabet was up a fraction, near 760, while Microsoft stock was also up a fraction, near 55. IBD 50 stock Alphabet gets a best-possible Composite Rating of 99 from IBD. Microsoft has a 75 and Apple a 70. Image provided by Shutterstock .