Microsoft has announced significant price reductions for its Azure cloud service as it attempts to rival Amazon's dominance in the area.

Compute prices will be chopped by up to 35 per cent, while storage prices will be axed by as much as 65 per cent.

The reductions mean that Microsoft has either matched Amazon Web Services prices or dropped them even lower. This fulfils a previous pledge to equal Amazon prices.

Price war

Windows-based Standard A5 is now between 12 to 14 per cent cheaper than Amazon, while the Linux-based version is between 9 and 10 per cent cheaper. There are also reductions in many of its other services.

The move is likely to spur Amazon to consider another price drop of its own, and with Google recently slashing prices for its cloud service, there could be a full-on price war.

"We recognize that economics are a primary driver for some customers adopting cloud, and stand by our commitment to match prices and be best-in-class on price performance," Steven Martin, General Manager for Windows Azure said in a blog post.