Jul 18, 2003 : The webhost industry: week review

📅 July 18, 2003 - After several weeks of relative inactivity in the mergers and acquisitions arena, Web hosting companies came out in force this week with a wave of announcements regarding expansion, cutbacks, acquisitions and other deals, while several other organizations operating in and around the hosting business announced legal action.
On Monday, Yahoo announced that it had signed an agreement to acquire paid search service provider Overture in a deal totaling approximately $1.63 billion in cash and stock. Yahoo says the deal will place the company as the largest player in the growing market for Internet advertising, allowing it to provide a broad set of marketing solutions including branding, paid placement, graphical ads, text links, multimedia and contextual advertising. Overture, which currently serves more than 88,000 advertisers, will become a wholly-owned subsidiary of Yahoo. The companies expect the transaction to be complete by the fourth quarter of this year.
On Tuesday, Web hosting company Inflow announced its plans to increase its staff, and expand its facilities as a result of growth at the company. Inflow said more than 141 new customers had signed on in the first two quarters of this year, and announced that it will double its sales force to accommodate the demand. The company also plans to acquire additional data center space in some of its current markets and is planning expansion into new markets through acquisition.
Also on Tuesday, Atlantic.net announced further tribulations in its acquisition of Feature Price, saying that it had served the company with an eviction notice, giving officials until Thursday, July 17, to vacate the premises. The company also said that it had filed a small claims complaint against Feature price, calling for a temporary restraining order and preliminary injunction against Feature Price and other defendants. A dispute between the two companies resulted in all of the Web sites hosted by Feature Price going offline earlier in the month.
On Thursday, VIA NET.WORKS announced that it had sold its Italian operations to a group of buyers led by the unit's current managing director, Francesco Arculeo. The company says it sold the operation in order to maintain focus on its strategic plan in countries where VIA has significant operations and growth potential. VIA also said that re-entry into the Italian market was still an option, and could potentially take place some time in the future. The Italian operation will continue to trade under the VIA Italia name during a transition period.
Also on Thursday, it was reported that XO Communications would lay off 500 employees, roughly 10 percent of its work force, by the end of the year in an effort to consolidate operations. XO said the cuts would come from marketing, finance and human resources departments, adding that it planned to add 300 sales staff by late August. XO will further consolidate by reducing installation centers from eight to four and cutting network operations centers from four to two. Its four customer-base centers will remain.
All the news relating to mergers and acquisitions spilled over into other areas this week, including the legal arena, which saw several announcements of its own.
On Thursday, LEGATO Systems announced that the company and its board of directors had been served with two lawsuits in connection with recent announcements that EMC Corporation would acquire LEGATO in a stock transaction valued at approximately $1.3 billion. The law suits were filed in Santa Clara County Superior Court and allege breach of fiduciary duty and self-dealing. Both suits seek to force the closing of the transactions and force LEGATO to obtain a deal in the interests of shareholders. LEGATO says it believes the suits are without merit, and will defend against them.
Also on Thursday, members of the Domain Justice Coalition announced that they had filed a lawsuit seeking a temporary restraining order and other relief against ICANN, in an effort to block the progress of a new domain name Wait Listing Service (WLS) proposed by VeriSign and approved by ICANN. The Suit charges ICANN with failing to comply with its internal decision-making process requirements when it approved implementation of the WLS amid opposition from domain registrars, resellers and consumers. The coalition is made up of domain registrars and resellers who oppose the proposed WLS, which would create a single waiting list for expiring domain names. The group says the WLS is anti-competitive and anti-consumer and undermines the competitive secondary domain market.
After several quiet weeks in the Web hosting business, it was almost surprising to see such significant mergers and acquisitions activity this week. But there is undoubtedly more waiting in the weeks to come, as we should expect to soon hear the results of matters like XO's bid to acquire Global Crossing and Hostway's work to acquire NetNation.