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AT&T and Microsoft announce a strategic alliance to deliver innovation with cloud, AI and 5G

Multiyear collaboration will accelerate AT&T’s “public cloud first” internal transformation and deliver new customer offerings built on AT&T’s network and Microsoft’s cloud

Microsoft CEO Satya Nadella and John Donovan of AT&T
Microsoft CEO Satya Nadella with AT&T Communications CEO John Donovan.

DALLAS and REDMOND, Wash. — July 17, 2019 AT&T Communications and Microsoft Corp. are embarking on an extensive, multiyear alliance where the two companies will apply technologies, including cloud, AI, and 5G, to improve how people live and work today and in the future. Microsoft will be the preferred cloud provider for non-network applications, as part of AT&T’s broader public cloud first strategy, and will support AT&T as it consolidates its data center infrastructure and operations.

AT&T is becoming a “public cloud first” company by migrating most non-network workloads to the public cloud by 2024. That initiative will allow AT&T to focus on core network capabilities, accelerate innovation for its customers, and empower its workforce while optimizing costs.

As part of the agreement, AT&T will provide much of its workforce with robust cloud-based productivity and collaboration tools available with Microsoft 365, and plans to migrate non-network infrastructure applications to the Microsoft Azure cloud platform.

AT&T and Microsoft will together help enable a future of ubiquitous computing through edge technologies and 5G. AT&T was the first to introduce mobile 5G in the United States and expects to have nationwide 5G by the first half of 2020. Microsoft will tap into the innovation AT&T is offering on its 5G network, including to design, test, and build edge-computing capabilities. With edge computing and a lower-latency 5G connection enabled through AT&T’s geographically dispersed network infrastructure, devices can process data closer to where decisions are made. Recently, Microsoft and AT&T worked together to test an edge computing-based tracking and detection system for drones. With more connected devices and the growing demand for streaming content from movies to games, businesses and consumers require ever-increasing network capabilities.

The global scale of Microsoft’s Azure cloud and AT&T’s domestic 5G capabilities will enable unique solutions for the companies’ mutual customers. The companies will bring to market integrated industry solutions including in the areas of voice, collaboration and conferencing, intelligent edge and networking, IoT, public safety, and cyber security. The companies already have joint enterprise solutions for networking, IoT, and blockchain in market, and expect to announce additional services later in 2019. The two companies envision scenarios with 5G enabling near-instantaneous communications for a first responder who is using AI-powered live voice translation to quickly communicate with someone in need who speaks a different language.

“AT&T and Microsoft are among the most committed companies to fostering technology that serves people,” said John Donovan, CEO, AT&T Communications. “By working together on common efforts around 5G, the cloud, and AI, we will accelerate the speed of innovation and impact for our customers and our communities.”

“AT&T is at the forefront of defining how advances in technology, including 5G and edge computing, will transform every aspect of work and life,” said Satya Nadella, CEO, Microsoft. “The world’s leading companies run on our cloud, and we are delighted that AT&T chose Microsoft to accelerate its innovation. Together, we will apply the power of Azure and Microsoft 365 to transform the way AT&T’s workforce collaborates and to shape the future of media and communications for people everywhere.”

In addition to their technology collaboration, AT&T and Microsoft will work together on technology-enabled approaches and solutions aimed at social good. Both companies have been focused on addressing sustainability, accessibility, and community challenges such as homelessness and see an opportunity to support each other’s work to address urgent social needs, including Microsoft’s affordable housing initiative and the AT&T Believes campaign.

About AT&T Communications

We help family, friends and neighbors connect in meaningful ways every day. From the first phone call 140+ years ago to mobile video streaming, we innovate to improve lives. We have the nation’s fastest wireless network.* And according to America’s biggest test, we have the nation’s best wireless network.** We’re building FirstNet just for first responders and creating next-generation mobile 5G. With DIRECTV, DIRECTV NOW and WatchTV, we deliver entertainment people love to talk about. Our smart, highly secure solutions serve nearly 3 million global businesses – nearly all of the Fortune 1000. And worldwide, our spirit of service drives employees to give back to their communities.

AT&T Communications is part of AT&T Inc. (NYSE:T). Learn more at att.com/CommunicationsNews.

AT&T products and services are provided or offered by subsidiaries and affiliates of AT&T Inc. under the AT&T brand and not by AT&T Inc. Additional information about AT&T products and services is available at about.att.com. Follow our news on Twitter at @ATT, on Facebook at facebook.com/att and on YouTube at youtube.com/att.

© 2019 AT&T Intellectual Property. All rights reserved. AT&T, the Globe logo and other marks are trademarks and service marks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners.

Cautionary Language Concerning Forward-Looking Statements

Information set forth in this news release contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T’s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this news release based on new information or otherwise.

This news release may contain certain non-GAAP financial measures. Reconciliations between the non-GAAP financial measures and the GAAP financial measures are available on the company’s website at https://investors.att.com.

*Based on analysis by Ookla® of Speedtest Intelligence® data average download speeds for Q2 2019.
**GWS OneScore, September 2018.

About Microsoft

Microsoft (Nasdaq “MSFT” @microsoft) enables digital transformation for the era of an intelligent cloud and an intelligent edge. Its mission is to empower every person and every organization on the planet to achieve more.

For more information, press only:

Microsoft Media Relations, WE Communications for Microsoft, (425) 638-7777, rrt@we-worldwide.com

AT&T, Jeff Kobs, (214) 236-0113 jeffrey.kobs@att.com

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://news.microsoft.com. Web links, telephone numbers and titles were correct at time of publication, but may have changed. For additional assistance, journalists and analysts may contact Microsoft’s Rapid Response Team or other appropriate contacts listed at http://news.microsoft.com/microsoft-public-relations-contacts.

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Forbes exclusive interview: Satya Nadella reveals how Microsoft got its groove back

I

n early 2016, two years into running Microsoft, CEO Satya Nadella needed advice from one of his newest employees, the cofounder of an app-tool maker Microsoft had just bought. Nadella was close to pulling off his blockbuster $27 billion acquisition of LinkedIn, but he wanted to talk about another company he coveted: GitHub. “Can we do it?” Nadella asked the executive. “Have we earned the trust?”

Back then, the answer was no. GitHub is the virtual watercooler of software development, a site where millions of programmers talk shop and share code across company boundaries. Microsoft had earned a reputation during its 1990s heyday as its polar opposite, an insular software belligerent, and GitHub was seen as wanting nothing to do with it. But after watching Nadella lead the Redmond, Washington-based giant for two years, GitHub made a surprise move, choosing Microsoft over Google as its acquirer this past June. 

The December 31, 2018 issue of Forbes featuring Satya Nadella.

The December 31, 2018 issue of Forbes featuring Satya Nadella.

It was the latest coup for Nadella, 51, who’s breaking free of Microsoft’s recent past by returning it to its roots under cofounder Bill Gates.

“Bill used to teach me, ‘Every dollar we make, there’s got to be five dollars, ten dollars on the outside,’ ” Nadella tells Forbes, in his first sit-down interview since the $7.5 billion deal closed. 

Great companies were once built on Microsoft’s code, Nadella says he was reminded by Gates. Nadella’s mission: Rebuild Microsoft brick by brick until it can happen again. “That’s what I want us to rediscover,” he says.

Signs of Nadella’s progress are found everywhere. From a Microsoft voice assistant that integrates with Amazon’s Alexa to a deepening alliance with Samsung and, most crucially, in its financial statements. Revenue, at $110 billion, is growing at a double-digit percentage after slumping for most of the past decade, in large part because of the hard-charging—and high-margin—cloud suite the company has built around Office and Azure, Microsoft’s challenger to Amazon’s cloud juggernaut. Net profits are at $16.6 billion, an increasing share of which is attributable to Azure, which is growing at 91% annually with multiyear contracts only just starting to boost the bottom line. Microsoft ended November as the most valuable company in the world, eclipsing Apple and Amazon. The consensus among analysts is that it will hit $1 trillion in market cap sometime next year.

Read the complete Just 100 2019: America’s Best Corporate Citizens

Much of the credit belongs to Nadella, a Microsoft near-lifer who took the reins from Steve Ballmer in 2014 and immediately started knocking down walls. The former engineer says he has focused the company around a simple concept: “equitable growth.”

“People are finally coming around to saying, ‘It’s not just the surplus you’ve created for yourself. What’s the state of the world around you?,’ ” Nadella says. “That’s where I feel like we’re at our best.”

Nadella signaled his intentions with the help of an iPhone. Weeks after his start as CEO, Microsoft opened up its Azure cloud service to make it easier for developers to create iOS apps. The following year, Nadella used an iPhone onstage at an event—unthinkable for a company that had brewed up the market-lagging Windows phone in 2010 and then blew more than $7 billion in 2014 buying Nokia’s mobile division to support it. When Nadella took over, he wrote off the whole deal as a loss. 

Behind the scenes, Nadella got to work on Microsoft’s culture of infighting and of treating competitors as if it were “straight-up war,” as a former Oracle exec puts it. With its rearward-facing obsession with Windows, the cash-cow operating system, Microsoft was caught unawares by the cloud boom (exemplified by Amazon Web Services) and by subscription software businesses like Salesforce. 

CEO Nadella is returning to a core Bill Gates lesson: “Every dollar we make, there’s got to be five dollars, ten dollars on the outside.”

Nadella, who immigrated to America from India in 1988, was an insider who led the company’s nascent cloud business before taking the top job. He quickly installed new leaders and smashed the barriers between Microsoft and open-source rival Linux, which had been famously called a “cancer” by his pugnacious predecessor Steve Ballmer. Nadella and Scott Guthrie, the new cloud boss, welcomed Linux onto Azure’s IT framework, where it’s now used by half of all computer systems operating on Microsoft’s cloud. “When we achieved our success, with that success came out the classic hubris that I describe as being the know-it-alls,” Nadella says. “I said, ‘Let’s shed that.’ ”

To chip away at Amazon’s massive head start in cloud (Amazon Web Services is on track to make $27 billion in revenue a year, compared with an estimated pace of $10 billion for Microsoft’s Azure and $3 billion for Google), Microsoft turned to its partners. Sales reps are now compensated when a deal with a key ally of Microsoft leads to more activity on Microsoft’s cloud. And companies working with Azure find themselves brought into million-dollar deals at the one-yard line. “All of us have been stunned they are doing it,” says Bob Muglia, CEO of San Mateo-based data-warehouse software maker Snowflake and a 23-year Microsoft veteran, who left in the Ballmer years. “Satya’s recognized this is a service-oriented world.”

Starbucks, which uses Microsoft to help power its ordering app, sent a dozen engineers to the world’s largest invite-only hackathon, hosted by Microsoft—another Nadella-era idea. “It’s a different approach from a traditional software company,” says Gerri Martin-Flickinger, Starbucks’ CTO.

But there are asterisks attached to this new exuberance. Much of Microsoft’s success has come from moving existing customers onto its cloud services and its revamped Office 365 work software suite, raising concerns that the company is simply harvesting low-hanging fruit, says Dan Ives, an analyst at the Los Angeles investment firm Wedbush. And while the breadth of Microsoft’s portfolio, which also includes gaming, search and devices like Surface tablets, is a great strength, it could still get tripped up again by success. “The risk is they go back to the old days,” says Raimo Lenschow, an analyst at Barclays. (Both are bullish on the stock.) 

“People are finally coming around to saying, ‘It’s not just the surplus you’ve created for yourself. What’s the state of the world around you?’ That’s where I feel like we’re at our best.”

Now with GitHub in the fold—following acquisitions of the maker of Minecraft ($2.5 billion, 2014), app-building-tool provider Xamarin (reported as $400 million, 2016) and LinkedIn—Nadella’s team needs to avoid falling into bad habits such as restrictive long-term contracts. How the company integrates all these purchases—and history suggests it will be difficult—will also test Nadella. To navigate these challenges, Nadella relies on his broader vision that happier employees, customer and partners—even prickly coders—have to do well for Microsoft’s business to flourish. “A successful product is one that fosters more success around it,” Nadella says. 

To pull it off, Nadella will lean on new leaders like Nat Friedman, the Xamarin cofounder whom Nadella asked about GitHub in 2016 and then tapped to run the business for Microsoft once the deal closed. As Friedman, whose new job entails evangelizing that message to GitHub’s 31 million developers, puts it: “People are giving Microsoft the benefit of the doubt.”

Reach Alex Konrad at akonrad@forbes.com. Cover image by Jamel Toppin for Forbes.

This story appears in the December 31, 2018 issue of Forbes. Subscribe