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Microsoft Adds Fuel to the Cloud Engine with Its ExxonMobil Deal

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Microsoft bags a big one

ExxonMobil (XOM) plans to use Microsoft’s (MSFT) cloud computing technology to increase efficiency in its US drilling operations, in what may be the oil and gas industry’s largest cloud deal. ExxonMobil is the world’s largest publicly traded oil and gas company.

In ExxonMobil, Microsoft has won a huge cloud customer whose name alone could pay off in several ways. In addition to generating direct revenue for Microsoft, the contract could also be a major validation of Microsoft’s cloud technology. This profile boost could make it easier for Microsoft to win more cloud customers in the oil industry, potentially fueling more growth in its cloud business. Microsoft’s cloud revenue increased 76% year-over-year in the December quarter.

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Microsoft playing catch-up to Amazon in the cloud market

ExxonMobil says Microsoft’s cloud technology will help it increase the profitability of its shale operations in the Permian Basin. Amazon (AMZN), with many years of a head start, currently dominates the global cloud computing market. According to Synergy Research, Amazon controlled about 35% of the global cloud market at the end of last year, more than double of Microsoft’s ~15% market share. Google (GOOGL) and IBM (IBM) exited the year with ~7.5% of the global cloud market each, and Alibaba (BABA) held ~5.0%.

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