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AT&T `Speed Dating' With App Firms to Gain Edge Over Verizon

AT&T Inc. is ramping up mobile- software development at new offices set to open in the U.S. and Israel to capitalize on the growing market for programs for Apple Inc.’s iPhone and Google Inc.’s Android.

The carrier will announce next week its plan to open facilities in Palo Alto, California, Tel Aviv and Plano, Texas, where it’ll advise software firms on mobile-application development in a project costing “tens of millions of dollars,” Chief Technology Officer John Donovan said in an interview.

“The three centers provide us with a near-20 hour work day, so it lends itself very well to agile kinds of development,” Donovan said.

AT&T, the second-largest U.S. mobile carrier, plans to tap the market for mobile software by offering business and consumer apps faster than rivals Verizon Wireless and Sprint Nextel Corp. Consumers will spend $6.2 billion on apps worldwide this year, up from about $4.2 billion in 2009, according to Gartner Inc.

Donovan said he plans to meet with as many as 400 software firms a year to hear 8-to-10 minute pitches, a process he calls “speed dating.” If AT&T likes an app idea, the carrier may help the firm develop it and offer the program on its network first.

“Why would we do it? Because we’re going to end up with something to market faster than our competitors,” Donovan said. He said AT&T expects to introduce about 30 apps annually through collaboration at the new facilities, where the Dallas-based company will employ as many as 36 people combined.

Photographer: Ronda Churchill/Bloomberg

The carrier will announce next week its plan to open facilities in Palo Alto, California, Tel Aviv and Plano, Texas, where it’ll advise software firms on mobile-application development in a project costing “tens of millions of dollars,” Chief Technology Officer John Donovan said. Close

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Photographer: Ronda Churchill/Bloomberg

The carrier will announce next week its plan to open facilities in Palo Alto, California, Tel Aviv and Plano, Texas, where it’ll advise software firms on mobile-application development in a project costing “tens of millions of dollars,” Chief Technology Officer John Donovan said.

AT&T will profit by sharing revenue from the apps it helps develop, such as games, ringtones or business programs, he said.

Driving Sales

“Only recently have mobile apps started to take hold, so this is a pretty new market,” said Maribel Lopez, founder of San Francisco-based Lopez Research, which tracks the mobile industry. “Carriers now realize that apps are driving device sales as much as the devices themselves can.”

Verizon Wireless, the largest U.S. mobile carrier, and Sprint, the No. 3, host developer conferences regularly and also have websites where software companies can exchange app ideas.

Sprint will open an office in Burlingame, California, this month for so-called machine-to-machine developers, said Kristin Wallace, a spokeswoman for the carrier. Verizon Wireless is considering adding a facility for app development in the San Francisco area, spokeswoman Debra Lewis said.

Venture Partners

AT&T is partnering with venture-capital firms Sequoia Capital and Kleiner Perkins Caufield & Byers, early backers of Google, for its app-development venture. The firms will help AT&T identify promising application developers and may invest in companies that emerge through the process. AT&T won’t take equity stakes in any of the companies, Donovan said.

“If AT&T expressed an interest in a company, we’d probably lean in further on that opportunity,” Jim Goetz, a partner with Menlo Park, California-based Sequoia, said in an interview.

Matt Murphy, who manages the $200 million Kleiner Perkins iFund that invests in iPhone app firms, said AT&T’s plan to open the Palo Alto office will help speed up the development process.

“It’s invaluable to be able to go up there on a moment’s notice,” he said in an interview.

Having the backing of AT&T can ensure smaller firms succeed, said Michael Mullany, a vice president at Sencha Inc., a Palo Alto-based software company that’s working with AT&T on app development.

“This lowers the bar for more startups,” he said in an interview.

AT&T rose 21 cents to $28.81 at 4 p.m. in New York Stock Exchange composite trading. The shares have added 2.8 percent this year.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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