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AT&T, Inc. (NYSE:T)

Cowen Technology, Media & Telecom Conference

May 28, 2014 9:30 am ET

Executives

Steve Caniano - VP, Networked Cloud Solutions

Analysts

Colby Synesael - Cowen and Company

Colby Synesael - Cowen and Company

Okay, good morning. My name is Colby Synesael. I'm the telecom services analyst here at Cowen. With me for this presentation, we have Steve Caniano, who is the Vice President of Networked Cloud Solutions at AT&T. Before I jump into my questions, I thought I turn it over to Steve to go through the Safe Harbor.

Steve Caniano

Thank you, Colby, and good morning, everyone. I need to call to your attention our standard Safe Harbor statement before we begin. We'll probably say some things or make comments today that may be forward-looking. As such they're subject to risk and uncertainty. Actual results may differ materially. You could at, for additional information, on our website and/or DirecTV's website and our SEC filings.

Colby Synesael - Cowen and Company

Okay, great. So first off, Steve, so thank you for being here. Can you first give us a brief overview of what your responsibilities are at AT&T, so we can get a sense what it is you're focused on? And then can you provide a basic overview of AT&T's cloud and hosting strategy?

Steve Caniano

Sure. And thanks, Colby. As you know, when we've spoken in the past, I spent quite a bit of time running AT&T's cloud hosting business and have recently moved into a role where I'm working with customers to help apply that strategy towards their business problems in the enterprise customer base.

From a services and portfolio perspective, AT&T is a full service cloud hosting solution provider. It all starts with the network, which has always been our core, providing customers with a platform on which to run their applications securely and in a high performance manner. And then built on our services model to run applications, run infrastructure, help customers navigate the network solution set to the cloud of their choice. And we've been a global service provider largely enterprise customer focused for a long time and very successful in that regard.

Colby Synesael - Cowen and Company

We were fortunate enough to have you present here two years ago at this conference. And I'm curious what you think has been the biggest change in terms of AT&T's cloud strategy or even the industry more broadly since you last spoke with us?

Steve Caniano

Well, I would say from an industry perspective, first and foremost, I think the emergence of hybrid cloud is probably the biggest in my mind, and the solutions model and orientation around that. Whether its public or private cloud, whether it’s multiple cloud solutions that a customer may choose, we see that model emerging rapidly.

And from an AT&T strategy perspective, you may recall when we last spoke we talked about the network enabled cloud, which is a core to what we've done. Securely marrying our network services such as our VPNs with our cloud and application services we've opened that up in what we think is a pretty innovative model in essence allowing other cloud companies and service providers to integrate with the AT&T network in much the same way that we've done ourselves. It's a big step forward in that we've basically availed the network controls and the control point to other providers but basically gave choice to customers to access multiple cloud services off the AT&T network in the same seamless integrated fashion with performance, with security, with scalability. And so we're addressing that hybrid cloud solution set very directly in an area that we think is kind of market leading.

Colby Synesael - Cowen and Company

So we'll talk about those things. We'll talk about NetBond. We will talk about some of the partnerships very shortly. But just in terms of adoption certainly for AT&T, but also more broadly I guess again for the industry, where do you think enterprises are today in terms of cloud adoption and I know that's a very ambiguous term cloud but take that, however, you want to go?

Steve Caniano

Well, I think the last time, we spoke, I probably I gave you an analogy and said we are around a third inning or so of cloud. And I think we have advanced since then. I think we are still in the relatively early phases, however, of the adoption cycle. I think what has occurred, however, is virtually every CIO out there is looking at a cloud-based model as they have an opportunity to modernize their applications and re-architect, reengineer how their businesses will be served by the applications in the future.

And I think that means different things to different players. In some instances, it means how do we develop a private cloud to better scale our business. In other instances, it may mean how do we leverage a set of public providers or some combination thereof. But I think the adoption cycles are advancing and I think that there is still a long way to go in that regard as well.

Colby Synesael - Cowen and Company

Are you seeing CIOs proactively moving apps to a cloud environment or they're waiting until replacement cycle to do so?

Steve Caniano

I think they are making logical business decisions based upon the economics and the business need that they have. We don't see folks, for example, doing forklift upgrades of applications for the sake of migrating into cloud. We see it for areas of business functionality enablement; we see it for our cost economies that they can derive through cloud. And so there is a significant program, I would say, in many IT shops around that theme of apps modernization for the cloud. But I think it's in a very logical lifecycle from an application perspective.

Colby Synesael - Cowen and Company

You talked about partnerships and your cloud strategy seems to taken on more of a partnership approach in the last year including a new partnership with Azure last September, Equinix this past February and Salesforce two weeks ago. Can you talk about what the intended goal of the strategy is and how your NetBond product fits into this?

Steve Caniano

Yes. That's a major area for us. And as I mentioned in terms of the hybrid marketplace that we see evolving, we see really customers wanting choice. We also see customers wanting enterprise class services to be able to move more serious applications to a cloud type of model. And so, when we introduce the initial AT&T cloud offerings, we did it in what we call the network-enabled fashion, which was really tightly integrating our VPN technology and services with our cloud in a way that seamlessly created on net services we thought about that. And it gave significant advantages to the customer to be able to address performance security, even cost, for example, in a much more elegant fashion.

What we heard from customers is that that's the type of configuration that they believe they need for a multitude of clouds that they want to access today. If you look at Salesforce, for example, which is the most recent partnership that we have announced, that's a very different type of cloud than AT&T would offer, for example, in that it's a purpose built SaaS application for unique use case.

Many of our customers, large enterprises are very interested in accessing a CRM type application, but want to do so under the same premises I just described from a networking perspective. How is that that they can extend their network into the cloud of Salesforce in a secured fashion that's highly scalable? And that's where our NetBond technology came in. So we have shifted from what was dedicated towards an AT&T cloud to extend it to more of an ecosystem play across a set of popular cloud service providers that are important to our customers to create really options and choice of cloud of the AT&T network to meet their demand set.

Colby Synesael - Cowen and Company

So I certainly understand that when you are thinking about a specific SaaS provider like a Salesforce, but can you talk about your partnership with Equinix, a traditional co-location provider and what you anticipate giving out of that relationship in particular?

Steve Caniano

Yes. Equinix obviously is in the datacenter business and has tried to create communities one of them being a cloud type of community. I think they had been relatively successful in attracting a number of cloud providers into their various facilities of all different types of clouds for example from infrastructure to platform to SaaS type applications. And so we see potential synergy to be able to extend the NetBond into an Equinix facility and avail the various clouds that may reside there to also potentially come on that into a NetBond ecosystem. So that was kind of the premise behind that particular arrangement.

Colby Synesael - Cowen and Company

Okay. And then how does your own Synaptic cloud offering fit with this whole multitenant approach clearly something again make Salesforce very complementary the line starts to blur though when you started thinking about some of these infrastructure, the service offerings like as who you are also partnering with? Just trying to get a sense, does this -- is the intention to have Synaptic cloud grow because of these relationships, are you thinking more broadly than just having revenue growth come from Synaptic? Just walk us through that.

Steve Caniano

I would say that they are certainly could be some overlaps between the types of cloud that we enable in our own cloud, we have recognized that. But it's always about the solution that we are most interested in in giving our customers the broadest array of services. We are very happy when they select the AT&T solution set. We know we have a topnotch capability set. We provide managed services that we think are second to none for example. But if the customer is looking for someone else's capability either due to applications they may have already written with another supplier, for example, or technology choices that they need to make, we're happy to interconnect with those providers as well.

We see the fundamental foundation as the AT&T network in that instance and we really want their applications to be able to run securely in a high performance fashion across that network whether they choose the AT&T application services and cloud or someone else's.

Colby Synesael - Cowen and Company

And walk us through the business relationship with these various partners now that you are bringing into the AT&T cloud ecosystem, are you kind of creating join go-to-market strategies with these companies? Is there revenue share opportunities? Is there are new business model or financial model that's being created amongst you in some of these partners? Just trying to get a sense how AT&T effectively gets paid for some of these new opportunity beyond just perhaps the NetBond solution maybe that is how you get to that.

Steve Caniano

I would say they are unique. Obviously, I mean each one has to be crafted independently based upon the particular go-to-market that we envisioned with the partner. And there are across a wide variety of models thus far. We have had some instances particularly with some of our system integrated partners who are bundling the AT&T services into larger solution sets that they sell.

So they may face-off to the end customer with let’s say an IT outsource type of value proposition that incorporates AT&T services be the things like NetBond and or AT&T network solution set and our managed services and they sell the end solution to the customer. There are other instances where we have more of a side-by-side selling emotion such that both parties may have a relationship directly with the customer. We may sell the customer solution set from the networking through NetBond and the partners may sell their cloud services and while we will coordinate that those are independent business models and transactions.

We may also have instances on the low end of the marketplace in, in more of our small business market where we are selling through ours and channel partners, who are also pulling through AT&T services things like VPNs, cloud, mobility for example in value added solutions that they are targeting at their customer base and we are very happy to have that reached through those partners as well.

Colby Synesael - Cowen and Company

And in terms of awareness on the market side, I think from an investor perspective this is still a nuance then we are also so trying to get a better sense of exactly what you're doing to trying to get sometimes clouded by your – your very big wireless business. How do you grade market awareness with your actual end customer target opportunity in terms of what you guys are now doing with your cloud strategy? Do they see what you're doing, do they understand or is it still kind of something that they are still getting their hands around?

Steve Caniano

We have had a – I would say a very solid customer base for a long period of time and work very closely with those customers in planning our services. I think the awareness there is strong. And certainly, I think when you see what we've done from a NetBond perspective, much of that has been driven by customer demand. Customers have been very excited about the value for our position we brought into the market. And I think the leadership role from the network enabled cloud perspective and have driven us frankly to open up that program to work with others. And so I think that's a tribute to the awareness of some of the leadership that we've taken in this space and really executed upon.

Colby Synesael - Cowen and Company

So let's talk about NetBond. So it seems like other telcos are rolling out could-oriented networking products such as TW Telecom’s eLynk solutions, TW Telecom was up here just before you guys. Can you give us some more color on what you believe that NetBond arguably from some of these other telco oriented cloud products?

Steve Caniano

Well, one thing I would comment on is that, it's interesting how many providers are making moves into kind of the private network space for cloud. And I think that's a testament in many ways to the recognition that it’s an important piece of the cloud value proposition. We think we have taken a unique approach and have a leadership role with our NetBond program that is in order of magnitude from what many others have done with so called private or direct connections to various cloud service providers.

Don't get me wrong, I think that's a step in the right direction. In that it's a step forward from pure internet access to clouds. However, it doesn't have the feature set that a NetBond does. NetBond for example, is differentiated in several fashions. One is, it's engineered to work in concert with the clouds that we've partnered with. So we've actually opened up our network technology and enabled an API access from the cloud service provider such that they can operate seamlessly as part of our network that's an important differentiator versus just connecting to someone's cloud.

We also have built in redundancy in our NetBond interconnections to any of the providers so that if someone was provisioning a direct connection or private line connection they need to think about how they get redundancy built in. And often need to provision multiple connections, in many cases to multiple service providers. When you are sitting in the NetBond ecosystem, you're sitting on the AT&T network. You have ready access to an on net set of service providers that are part of our ecosystem, that are built in with that redundancy.

You also have scalability built in to the network side of the cloud solution, which is again something differentiated from a fixed private connection. We certainly, wouldn't want to see the network become a chilled point for the cloud solution set that would kind of defeat the purpose, so we've got that scalability built in as well. And we see really in many instances a cost advantage as well. Because you have such an any to any type of nature of the configuration that we have enabled, that you don't have to find yourself provisioning multiple private lines from datacenter one to cap two, partner two and then multiplying that by the number of cloud that you might want to access.

So there are many, many differentiators and we think it's really a step forward in terms of the solution set that we built in.

Colby Synesael - Cowen and Company

And how have the adoption looked like so far, any color on uptick of the NetBond product and I guess I will just take the opportunity to as this. Right now it seems like its only available in the U.S., is there any plan to expand that internationally?

Steve Caniano

Well, it's already international. We have enabled -- again, this is partner specific. The AT&T services are available outside the U.S. through NetBond as our -- are with the number of our partners and that's case by case. The uptake has been good. We've been very excited about that. And even with some of the recent announcement, the demands that started to materialize is also something we are excited about.

Colby Synesael - Cowen and Company

Let’s tick over to security, so I think one of the aspects of NetBond is the increased level of security that you naturally get. However, can you expand on the company's security strategy, what does that look like today? Are you simply reselling others products, have you kind of created your own product to integrate with the overall cloud and hosting solutions? Just a little bit color there.

Steve Caniano

Yes. Well, taking the NetBond question first. What we basically have done is, we have moved the cloud into the private IP space, if you want to think it in that way. So that a customer is basically running within the confines of their private network and not a public Internet domain, which is a much more enterprise centric fashion of operating their cloud solution. ATT has been in the cloud -- I'm sorry, the security business for quite a few years. This is an area that is inherent to everything that we do. As you imagine, carrying for the network at the scale that we do, we have hundreds of professionals who are in essence supporting the security aspects of our services, as well as our customer services that we provide.

And it's something we think about in all of the services as part and parcel scenario that has become more front center to our customer set and virtually every CIO and CEO out there with the public breaches that we've seen. But we see that our position from a network service provider is a critical one. In that guarding customers parameter with the traditional appliances, they are purpose built, they are ultimately not going to be sufficient in the sophisticated environment that we're seeing emerge and the types of attacks frankly that are happening out there. You need more of a dynamic network based approach. You need capabilities build into your service as opposed to something that you put off at the side and that's the space that we have been focused on for a long period of time.

Colby Synesael - Cowen and Company

So you favor cloud oriented security solutions as opposed to client space security solution. When it comes to explicit things like DDoS mitigation or web application firewall or network forensic, are you integrating off the shelf products that you perhaps have integrated from others into your solution set? Or have you guys gone and made acquisitions that may not be familiar with even things in-house to kind of provide these types of solutions?

Steve Caniano

Yes, it's a combination. And we certainly have taken market leaders out there and incorporated their technologies into service model and that's something we'll continue to do. We certainly see an evolution towards more of a network based solution model as opposed to a premise-based appliance model, as a direction that we intend to follow.

Colby Synesael - Cowen and Company

Okay. And shifting over to mobile. The side leveraging the network aspect which is obviously a very important differentiator for AT&T's cloud strategy, to what extent have you been successful in leveraging the company's mobile assets within your cloud strategy?

Steve Caniano

I would say it's a very important area. And when we think about our strategy we really think about it in three folds. It's really about an all IP solution, say its mobile enabled and it's certainly cloud-based and so the three go hand in hand. And with the predominance of mobile-based applications that are emerging, we find the cloud becoming more front and center in terms of importance in our customers minds. And we enabled so many applications even in our own business that our mobile apps enabled thorough our cloud, if you think about some of the things we've announced in the consumer space, things like AT&T Locker and Digital Life for example, which are inherently mobile offerings to the marketplace were delivered in a cloud-based model.

So we are demonstrating as a solution provider and even a customer ourselves the importance of the integration between those two critical areas of technology. As the world drives to more mobile-based applications, things like machine-to-machine, we see those inherently also leveraging cloud-based technology and so it’s a natural synergy.

Colby Synesael - Cowen and Company

So more on the application layer in terms whether synergy between mobile and cloud, then on the infrastructure, or on the platform side of things that…

Steve Caniano

I think there are synergies in that space as well; I mean certainly if you look at business applications today and how customers are accessing them, we are finding predominance these days. We are starting to have mobile-based users needing that same secure access to business apps as you would've traditionally on land line based PC's and laptops. And so extending the same user experience, extending a similar security model for high performance type of latency that you'd expect to a smartphone user or tablet user becomes critical in the business marketplace as well.

Colby Synesael - Cowen and Company

It does seem like the Internet of things or the industrial Internet that sometimes refer to is a huge opportunity certainly for AT&T probably, but even within your part of the business, is that an area where you are spending a lot of time trying to understand, how do you plan to that and maybe some color in terms of what you guys have seen so far?

Steve Caniano

Yes. No, I agree. I think as you look at connected devices and in more and more so those devices not necessarily representing humans per se, but perhaps shipping containers or dispensers of soft drinks or what have you those are all real use cases that we have enabled for many of our customer businesses already. And helping customers to think about more of a mobile first business model in their business is something that we spend a lot of time on with each and every one of those customers. And then looking at our services that will help them to realize that type of vision from the mobility network obviously ,our cloud based capabilities, our managed services, our security suite; all of those come together to provide that border framework that a customer can look to help recognize how they might mobiley transform their business models.

Colby Synesael - Cowen and Company

That’s interesting. So when I try to think about how AT&T is probably different than others, despite having the cloud position, but the ability to take the devices and put them at the edge, its part of the overall mobile strategy; the actual physical device itself, the wireless mechanism within it plus the actual application can all be affectively provided by AT&T is all one solution, it does seem like there is necessity, they will be able to do that?

Steve Caniano

I would agree. And I think that type of bundling and that type of integrated solution orientation is what we are all about.

Colby Synesael - Cowen and Company

Wanted to shift over to OpenStacks, I've read that AT&T is big user of OpenStack. Can you talk about what AT&T is using for OpenStack for today?

Steve Caniano

We've actually been a participant in OpenStack from the relatively early days, we've representatives that sit on the board and help shape the direction of that team and we're optimistic of what that can drive in terms of the business. One of the areas that we have been, I'd say very public about is our loop towards what we call Domain 2.0 or user defined network cloud. And what that's about is really driving more of a software capability into our core network services making it more cloud like if you will.

So driving to more of commodity layer at the hardware side highly scalable across our infrastructure and by infrastructure think beyond our data center, think across our entire network points of presence.

And then moving from more of a purpose field appliance model to a software driven model that's network centric. And where we see the network going is largely in that direction overtime such that we can make the network itself more cloud like and we see a lot of the innovation being done by OpenStack driving some of the work that we have in that space.

Colby Synesael - Cowen and Company

So that's interesting. So you guys have talked about Domain 2.0 and it is around SDN. I guess what you are saying that OpenStack could be the enabler, or is that the expectation that OpenStack is the enabler of that I think what alternative you guys refer to is the common cloud infrastructure that this is kind of the lack of techno that turns to glue that kind of brings all this together?

Steve Caniano

I think OpenStack is one of the potential enablers, yes. I think there will be many suppliers obviously to participate in our ecosystem and with OpenStack could certainly be one that drives that direction as well.

Colby Synesael - Cowen and Company

And where we are in Domain 2.0, let’s kind of skip ahead, so just kind of OpenStack for a momentum, Domain 2.0, the software defined network. It logically makes a lot of sense, but it also seems like you require somewhat of rip and replace internally in terms of lot of your systems, am I thinking about that correctly and kind of where are we with that?

Steve Caniano

It’s certainly a – it's a vision and it’s a journey that will occur over a multi-period of years. We have issued for example the framework to the marketplace and invited participants to join us in the –

Colby Synesael - Cowen and Company

Some type of RFP type process?

Steve Caniano

Basically, I would say an open statement to the marketplace in terms of our direction or the user defined network cloud and invited participants to join us in that innovation. We have major projects underway now that'll start to realize that vision in key milestones over the next several years and we will expect that to evolve. So I wouldn't think of it as replaces much of an evolution of our service model and our core network.

Colby Synesael - Cowen and Company

So it sounds like OpenStack that was still back to that is really about improving the internal system if you will of AT&T as opposed to selling in OpenStack-oriented cloud solution, is that fair or are you actually now in the market or looking to sell at some point an OpenStack based cloud offering?

Steve Caniano

Today we are not selling generally in and of itself in the cloud business an OpenStack oriented solution. We do leverage OpenStack in some of our own offerings to the marketplace with some of our applications in particular and let's say a consumer market. And there were customers out there in the enterprise space who are very interested in OpenStack and are actively engaged in projects that that are utilizing that technology. And I think over time, the market will tell whether or not that becomes a more significant piece and something that we need to commercialize as well from a hosting perspective.

Colby Synesael - Cowen and Company

One of the criticism of OpenStack that we hear and had for a while is that it's not "production ready" and therefore many enterprises just aren’t in a position to actually deploy, they maybe interested. But they are just not there or they could actually deploy today. Do you have any sense around that and just more broadly, do you – something that could really prove to be hindrance to overall adoption or is that something that's point in time and eventually they will get resolved.

Steve Caniano

I expect that to be to be resolved as OpenStack matures. I think that it has already come a long way for example and we are running successfully services on an OpenStack framework now, so it has matured significantly I expect that to continue.

Colby Synesael - Cowen and Company

One of the – was in the last OpenStack question, I apologize for so many. We have heard that OpenStack networking as a service module that is referred to as Neutron, is that not to be robust enough for enterprise adoption as part of the issue? Is the scenario where AT&T could help out in terms of leveraging your own legacy network experience?

Steve Caniano

I wouldn't say so much legacy network here but I think AT&T's network experience is, it puts us in a leadership position there as you look at things like virtualizing networks and network function virtualization and SDN for example. I would say as one proof point what we have done with NetBond in opening up for example the network control plain through an API layer is an example of how you can bring enterprise grade services into the SDN space. We really look at it though more holistically. We look not only within the data center. We will look across the WAN and try to provide an end-to-end model of how we can virtualize network services at scale, which is a significant direction for us.

Colby Synesael - Cowen and Company

Okay. I wanted to shift over to competition. When you think of the competitive landscape, it seems likely that large telecom and IT companies like yourself are increasingly focused on the hybrid cloud hosting market. What do you think is going to be the key component that will separate those that are successful and those that aren't?

Steve Caniano

I would say several things. One is scale certainly and another is service and cloud is a challenging space and technically, I think many customers and users are struggling to have the right talent to design engineer and operate a cloud. And so being able to do that, if scale being able to do it globally, being able to provide service models and wrappers around that to successfully deliver mission critical type services in the long run, I think will be critical success factors. I also would add to that choice you mentioned hybrid and I agree with that as a direction.

We don't think there are any single winners out there per se. We think there are many providers that customers who want to use for various capabilities and use cases and being able to incorporate that myriad of providers into a solution set seamlessly is going to be very important in the long run and thus we have already started down that journey with the ecosystem we have created and I think others will latch on to that we have already seen some of that.

Colby Synesael - Cowen and Company

Okay. And I'm going to ask one or two more questions and then I will open up to if there are any questions from the audience. But as related to competition who are you earning up against, I think what I find interesting about is, some one who you naturally think of like IBM and CSC are actually partners of IBM. And it seems like they are increasingly expanding that partner base who is the natural competitor that you are today seeing in the marketplace?

Steve Caniano

Yes, you are right. It's a complex marketplace and there are sometime scenarios where we compete with others and sometimes scenarios where we partner and it really depends on the customer instance. We do see enabling some of our capability set with partner such as the two you mentioned there is an important piece with our strategy often they are in a different discussion sometimes on a broader solution set with customers and we want to be part of those solutions and that's part of the strategy there. Maybe other instances where we compete with system integrators we certainly see that the pure plays in the market. We see the other telecoms in the market depending on scope we may see the data center providers of the market.

So it's a pretty diverse marketplace and competitive playing field. I still think as I've probably said in the past that the single biggest opportunity set is the IT shop that does it themselves, who is trying to build their own solution set, do it all in-house and I think that that's becoming increasingly challenging from both the complexity and skill set standpoint. And so to me that's a market opportunity for the marketplace at large.

Colby Synesael - Cowen and Company

You mentioned public cloud providers, so I'm assuming you named AWS and Azures and the Google Cloud Engine. If you're in the same deal or backup if you work for an opportunity, is it logical to think that one of you just in the wrong place, I mean should you be going up against those guys, I mean it would seem like what you're signing it's very different value proposition?

Steve Caniano

Yes. We're generally not playing in what I would consider to be the commodity public cloud per se. That's not to say we couldn't be in a backup with a public cloud provider and that we are a public cloud provider as well. But you're right. I mean, generally we come out at with very different integrated solution oriented value proposition, and so, we are often rolling in managed services. We certainly are integrating our network solutions. There may be some of the mobility type expansions we spoke about earlier. And there is often a service wrapper around the solutions that is critical for those customers who don't want to do it themselves. So there is often a very different value proposition that you're seeing in the pure public cloud from what we're offering.

Colby Synesael - Cowen and Company

And the service wrapper aspect that you're referring to, just make sure I understand that, of the people thing, that's a level of service and support, the customization, the support after the solution has been built out and launched is that what you're referring to when you get…

Steve Caniano

Yes, I would call it people and tools and process really around the managed services experience, around ensuring that the application meets the customer expectations and is driving consistent with their business direction. Not a self serve type model which is a pure experience that best effort if you will, but much more so in SLA driven service model that achieves the customer's business objectives.

Colby Synesael - Cowen and Company

Okay. Is there any question from the audience?

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

Colby Synesael - Cowen and Company

And the question is around scaling in international potential?

Steve Caniano

Yes. Our business in the – and hosting business is global today. Our datacenters are 38 strong, roughly half are outside the United States and all interconnected with our global network backbone. And so we have been supporting global multinationals for years. Some of our largest customers are headquartered outside the U.S. and in many cases have globalized their business by leveraging our infrastructure. That's a particular area of demand for us and growth that we have experienced. And we'll continue to support that demand set.

Colby Synesael - Cowen and Company

Roger?

Unidentified Analyst

(Question Inaudible)

Colby Synesael - Cowen and Company

And the question is around organic versus inorganic growth strategy?

Steve Caniano

Yes. And generally, I would say we have largely built organically. We've done a few key acquisitions over the years and have incorporated them into our capability set, but largely we have -- we like our capability set. We've got a large enterprise IT organization that has synergies what we do on the commercial side that we think also gives us a capability, as well as a scale advantage to leverage. That said, as you've seen, we've done a number of things in the partnership space and are very open to that. And it's a dynamic market so we've always got to keep our eyes open. But by and large, we have built the business organically.

Colby Synesael - Cowen and Company

What was the last acquisition that you grouped at?

Steve Caniano

I think the last significant one would probably have been U.S. Center Networking, which is the ASP business.

Colby Synesael - Cowen and Company

2006?

Steve Caniano

2006, 2007, right. We've rolled that into our capability set and track, that has become a crux of our application services business and in many ways our multi-tenant cloud as well.

Colby Synesael - Cowen and Company

And I mean -- I guess, so the question that was asked then when you look at your product set, you look at who you consider to be your competitors whether it's OpenStack, whether its specific products, you feel like you have everything and obviously that tells what that is, you are feeling that what is exactly missing. But you feel like you have a full product set today and -- to go-to-market with what you need to?

Steve Caniano

We have a full product set in the spaces that we play in today predominantly. We have expanded I think very much so through partnerships. And we don't necessarily need to do an M&A per se to be able to enable capability. But it's a dynamic marketplace, it's something that we need to watch closely and we'll address if need be.

Colby Synesael - Cowen and Company

Is it fair to -- I'm sorry, if I interrupted you. Is it fair to assume that every potential deal that comes to the market, you guys are looking just like everybody else?

Steve Caniano

I can't really comment on that.

Colby Synesael - Cowen and Company

Got you. All right.

Unidentified Analyst

On the competitive landscape, some of the large linked IT vendors like HP and Cisco have announced cloud, services, integration. Do you view what they are doing as kind of clouding that they are announced, but do you view them as competitors or partners?

Colby Synesael - Cowen and Company

These questions are --

Unidentified Analyst

Or competitors?

Colby Synesael - Cowen and Company

The question is around competition, from some of the IT service providers?

Steve Caniano

Yes. I mean -- and again, it's a bit of complex marketplace. And some the folks you mentioned are in instances partners of ours, in instances competitors and frankly, in instances they are customers and potentially even suppliers. So a lot of it is it depends. I mean, I think that virtually every provider, particularly the traditional IT providers are looking at and adjusting, in some cases they are competitive positioning in the marketplace relative to cloud. What does it mean to their traditional business, how do they flex into more of an on-demand type model, services based and cloud like? And so you're seeing some very interesting dynamics and probably reassessment is going on which is mudding the waters that much early.

Colby Synesael - Cowen and Company

Great. Any other questions. Okay. With that we are out of time any way. So thank you very much for being here.

Steve Caniano

Thank you, Colby. It’s my pleasure.

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Source: AT&T's (T) Management at Cowen Technology, Media & Telecom Conference (Transcript)
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