As reported by Boston.com, “Rackspace Hosting Inc. may face tougher competition because of price cuts at Amazon.com Inc.’s cloud-computing unit, Dow Jones reported. Amazon Web Services has slashed prices as much as 80 percent for so-called dedicated computing — use of rented machines that are restricted to a single customer, often for security and regulatory reasons. That could make it harder for the much smaller Rackspace to grow. Rackspace typically charges more than big rivals.”
What’s interesting about this report is that cloud pricing is driving the value of companies, such as Rackspace. Moreover, their close competition, in this case, Amazon Web Services, can indirectly manipulate the price of a competitor’s stock via the price of their services.
This is legal and has precedence within other industries, such as the airlines. However, most cloud providers, such as Microsoft, IBM, HP, and Amazon Web Services, are in traditional IT businesses, thus their other cloud providers raising and lowering prices won’t have the same affect as on pure play companies such as Rackspace.