Amazon Unveils Free Cloud Services Amid Falling Margins

Amazon on Thursday on Thursday unveiled a new program aimed at business users and developers of its Amazon Web Services under which they can run a subset of the Amazon EC2 cloud service for a year and access related Amazon S3 storage services free of charge.

The new move, which follows other recent changes to its business offerings, aims to attract new users and developers to try its cloud services even as the company warns that the cost of attracting new business could grow.

Beginning November 1, new AWS customers will be able to run a free Amazon EC2 cloud instance for a year. They also get access to a new free usage tier for the Amazon S3 storage service, Amazon Elastic Block Store, Amazon Elastic Load Balancing, and AWS data transfer, giving them a chance to get used to working with AWS at no charge.

An instance is a Web service that includes an operating system, application, data, and associated configuration settings. Instances can be paid for on an on-demand basis or a spot basis, or can be reserved in advance.

The company expects that developers will take advantage of the new tier to launch applications at no cost, and then scale to AWS' paid services as the application becomes popular. The new service comes on top of other enhancements for business customers the company recently started offering.

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Among them are new lower on-demand and reserved instance pricing for the largest high-memory instances for Amazon Elastic Compute Cloud (EC2) and Amazon Relational Database Service (RDS), which the company said makes it easier for developers to take advantage of AWS.

Also new this last quarter was the certification of several Oracle enterprise software applications to run on Amazon EC2, including Oracle E-Business Suite, PeopleSoft Enterprise, Siebel CRM, Oracle Fusion Middleware, Oracle Database, and Oracle Linux.

New programs aimed at cutting the cost of getting started with Amazon Web Services comes at a time when Amazon is cutting margins to increase sales.

The company on Thursday reported a healthy growth in third-quarter revenue of 39 percent and a less-stellar growth in earnings of 16 percent over last year, but disappointed investors with a guidance for the coming Holiday season that included the possibility of falling operating income compared to last year.

Amazon reported sales in the third quarter, which ended September 30, of $7.7 billion, up 39 percent over the $5.4 bill it reported in the third quarter of 2009.

Next: Free Next Year, But Cloudy Next Quarter

Amazon's guidance for its fourth quarter includes sales expectations of between $12.0 billion and $13.3 billion, or up between 26 percent and 40 percent compared to the fourth quarter of 2009.

While Amazon did not provide income guidance, it did say it expected operating income in the fourth quarter to be between $360 million and $560 million, or somewhere between a drop of 24 percent and growth of 18 percent.

Investors bashed Amazon for the warning. The company's stock ended the trading day up 6.3 percent at $164.97 per share, but plunged 4 percent in the first 90 minutes of extended trading to around $158.