Oct, 2001 : C&W Eyes PSINet, Says Digital Island Perfect Fit

📅 October 5, 2001 - British telecommunications firm Cable & Wireless said Wednesday that while managed hosting provider Digital Island was a perfect fit for the company, additional hosting acquisitions were not out of the question.
C&W purchased the California-based managed Web hosting firm in May for $340 million.
In the first briefing from the two companies since the acquisition closed August 31, C&W CEO Graham Wallace said the company was considering making additional purchases in the Web hosting field, including the Panamanian and Japanese assets of now-defunct ISP and Web hosting firm PSINet.
"We don't need to buy them, but obviously if acquisition of other assets or businesses accelerates growth or reduces costs, we will always consider that," he said. "As far as we are concerned, the capability that Digital Island brings us together with the Cable & Wireless infrastructure gives us all the pieces we need."
Wallace ruled out purchasing the assets of bankrupt Web hosting firm Exodus Communications for the moment, as he said it was still too early to determine what exactly would happen to the floundering company. "Time will tell on that, I think. That's only just, not unexpectedly, gone in to Chapter 11," he said.
During the conference call, the two companies also stressed that Digital Island will continue to focus on providing managed and enterprise Web services. Aside from believing the market for managed services will grow exponentially for the next number of years, Digital Island CEO Ruann Ernst also pointed out that many companies are moving more of their internal operations, including CRM and finance services, online. This indicates an increase in demand "for business-critical functionality," she said. "That's where we see the opportunity for outsourcing and becoming an integrated service supplier."
Ernst said the company was taking aim at three key vertical markets: finance, entertainment/media, and technology. The company already has a number of notable clients in these fields, including UBS Warburg, Disney and Compaq. The majority of the company's $140 million in revenues this year is expected to come from corporate clients such as these.
"These are not dot-coms," she said. "They're world-class institutions doing core business operations over the Internet."
Both Wallace and Ernst stressed that the combined companies will be able to provide a wide array of services across a multitude of locations. Prior to the acquisition, each company had half a million square feet of data center space and roughly 20 data centers. Combined, the two firms have one million square feet of data center space in approximately 44 data centers spread across 25 major metropolitan areas worldwide. The merger also provides Digital Island with access to Cable & Wireless' global network.
"Interestingly, both Digital Island and Cable & Wireless had separately announced before the merger they felt they needed about a million square feet to provide proper global coverage," Wallace said. "By putting the two together, we've got exactly what we need... and of course, the combined company has saved a significant amount of capital expenditure.
"Neither we nor Digital Island will be building any more data centers."
Both companies also stressed that combining the two firms would create a managed hosting firm on solid ground in terms of both finance and infrastructure. "This is great news for our customers," Wallace said. "They get a broader integrated range of services to help them increase revenues and reduce costs, and they'll get them from a financially-strong global supplier."