Oct 17 (Reuters) - Microsoft (MSFT.O) is preparing to bring Amazon.com (AMZN.O) as a customer for its 365 cloud productivity tools in a deal worth over $1 billion, news site Insider reported on Tuesday, citing an internal document and a person familiar with the matter.

The e-commerce giant has committed the amount for over five years and to secure more than one million Microsoft 365 license seats, according to the report.

Microsoft, whose shares gained nearly 1% in extended trading following the report, declined to comment. Amazon did not respond to Reuters' request for comment.

Amazon is expected to start setting up the new systems in early November, the report said, adding that the company currently uses a local, on premise version of Microsoft's Office products.

Reporting by Yuvraj Malik in Bengaluru; Editing by Sriraj Kalluvila