May 17, 2002 : The webhost industry: week review

📅 May 17, 2002 - Financial announcements from several Web hosting firms made for interesting news this week, as it became clear that no two companies were riding out the telecom downturn in the same way.

The bleakest financial news of the week came from KPNQwest, which said Wednesday it was running out of cash and that there "may be no underlying value" to its debt or equity securities.
"Under the present circumstances, without sufficient additional financial support from shareholders, strategic buyers or third party investors, KPNQwest is unable to draw further funds from the existing credit facility in order to meet its funding requirements for all of 2002," the company said in a release.
KPNQwest is a joint venture between US-based telecom Qwest and Dutch telecommunications firm KPN. Qwest released a statement following KPNQwest's announcement that said neither the company's customers nor revenues should be affected by KPNQwest's financial position.
British telco and hosting firm Cable & Wireless posted big losses this week, but said it had plenty of cash on hand. The company also said it had seen better than expected growth in its Web hosting units, as less customers jumped ship than expected when it bought bankrupt Web hosting firm Exodus Communications.
In a separate announcement, Cable & Wireless said that Chairman Sir Ralph Robins would resign as Chairman and from the Board at the end of 2002. He will be succeeded by David Nash, a non-executive director at C&W and Chairman of the company's audit committee.
Not all the financial news out of the Web hosting sector was bad, however - shares in Web hosting firm Interliant soared Thursday after the company released its quarterly report and said it had secured an additional $7.5 million in funding. Interliant said Wednesday it had secured a working loan of $7.5 million from Silicon Valley Bank, a California chartered bank.
On the mergers and acquisitions front, Internet performance management firm Keynote Systems said Tuesday it had purchased NetMechanic, a privately held provider of testing services used by webmasters and companies to test and monitor their Web sites. Terms of the deal were not disclosed. NetMechanic currently has approximately 19,000 individual subscribers to its services worldwide, and provides webmaster services like site optimization, search engine submission and 24/7 Web site monitoring.
A number of companies also introduced new appliances this week, though Apple seemed to create most of the buzz. Earlier this week, the company introduced the Xserve, a new 1U rack-mount server the company said features increased computing power and easy to use tools. The machine was designed from the ground up to complement Apple's Unix-based Mac OS X Server software, and features dual 1 GHz PowerPC G4 processors, each of which have 2MB of Double Data Rate (DDR) L3 cache. Apple also said Xserve is the first 1U server to use DDR SDRAM memory with up to 2GB capacity, and that up to 480GB of storage is available on four hot-plug ATA/100 drives.
"Xserve is the result of listening to our customers," said Steve Jobs, Apple's CEO. "Xserve is super easy to set up, and is easily integrated into existing networks. Plus, with its unlimited-user software license at no extra cost, Xserve is a tremendously cost effective server with real Unix under the hood."
Sun Microsystems also introduced a new appliance this week, unveiling a server geared toward Web hosting firms and SMEs on Monday. The server, which starts at $1699 (US), is pre-configured with the hardware and software requirements necessary for companies to deploy e-mail, Web hosting and other Internet services without prior server experience.
Dell also unveiled a new server Monday, this one designed for use as an email, file/print or Web server, as well as being good for high-performance computing clusters, storage area networks and small-scale departmental database applications. The server, which is priced at $2,399 and is available immediately, is one of the most powerful rack-optimized servers available today, the company said.
On the services side, SAVVIS Communications expanded its managed hosting offering this week by introducing its Fast Pack Intelligent Hosting Solutions, which is geared toward small and medium-sized enterprises. SAVVIS said its Fast Pack service delivers high-end, fully managed server platforms that meet the budget requirements of the SME market.
And a number of companies with great amounts of influence on shaping the Web hosting industry were in court this week fighting various legal battles. On Monday, domain name registration firm BulkRegister sued VeriSign, its leading competitor in Baltimore, claiming the company sent deceptive letters to BulkRegister clients in an effort to encourage the transfer of their domains.
A US District Court Judge agreed, issuing a preliminary injunction against VeriSign, ordering the company to stop sending the misleading letters to BulkRegister customers. In an interview Thursday, Tom D'Alleva, vice president of marketing for BulkRegister, said he expects legal proceedings would take some time to complete.
Meanwhile, a group of Internet firms said Monday that a Minnesota court ruling that requires police officers to be present for search warrants would threaten the privacy of their clients, slow the process and disrupt business, Reuters reported.
The group, which includes the Computer and Communications Industry Association, NetCoalition and the United States Internet Service Providers Association, filed papers with the 8th Circuit Court of Appeals in St. Louis.
"A large Internet service provider can receive literally thousands of search warrants and other requests for information during the course of a year," the brief said. Keep an eye open for news on that continuing argument.
So although markets staged a bit of a rally this week, it didn't seem to help Web hosting or telecommunication firms much. As this week showed, different companies are at different stages in weathering the financial storm, and it will be interesting to see which ones stay afloat.