Jun 20, 2003 : The webhost industry: week review

📅 June 20, 2003 - The week in the Web hosting industry saw continued activity on the mergers and acquisitions front in addition to the unveiling of several new special promotions. Following a trend that has developed over the last few weeks, a number of Web hosting providers announced special promotions aimed at attracting customers looking to transition their hosting services from distressed providers.
Monday, an extremely busy day on the M&A front, saw Interland announce the completion of its Hostcentric acquisition first announced late last year. Under the provisions of the deal, Hostcentric shareholders received $3 million in cash and approximately 13.5 million shares of Interland stock. In return, Interland acquired all of Hostcentric's outstanding shares. Interland said the acquisition of Hostcentric would help it expand its overall service offerings.
Also on Monday, Corvis Corporation and Cequel III announced that their joint venture, C III Communications, LLC closed the purchase of telecom carrier, Broadwing Communications. The purchase was originally announced in February for the price of $129 million, but was reduced to $91 million in accordance with the asset purchase agreement. The assets acquired from Broadwing include 18,700 recently completed route miles of fiber optic cables, switches and amplifiers in addition to a network operations center.
Monday closed with network service provider Internap announcing that it was involved in "advanced discussions" to acquire Fremont-based netVmg, a developer of Internet route control technology. Internap reported that discussions have progressed beyond the preliminary state and a transaction could be completed within weeks.
On Wednesday, pay per click (PPC) search engine FindWhat.com announced an agreement to merge with Espotting Media Inc., a popular European PPC engine. The merger, expected to close in the fourth quarter of 2003, would create an international group of 40,000 advertisers with over $140 million revenue in 2003. Under the proposed terms, Espotting stockholders will receive approximately 8.1 million shares of FindWhat.com common stock and approximately $27.0 million in cash.
And on Friday, Canadian hosting and managed service provider ZooLink announced it had completed the acquisition of Web Host Canada, a colocation and managed services provider based in Calgary, Alberta. The acquisition was the third for ZooLink in the past year.
Other developments beyond the changing hands of assets included a pair of major hosting companies unveiling special promotional offers.
On Monday, Affinity Internet launched its new customer loyalty program. The new program offers rewards and incentives to customers based on their length of service with Affinity. The rewards range from product upgrades to free domain names and are available to customers on all account levels. The loyalty program will initially be implemented to ValueWeb customers while Affinity's HostSave, WinSave and Bigstep brands will implement the program in the second half of 2003.
On Thursday, Interland unveiled a new promotional offer to its hosting customers in partnership with Google. Under the terms, Interland customers who sign up for the Business Solutions package will receive $50 worth of free Google Adwords advertising. Interland said the offer is designed to help small and medium-sized businesses better market their online products and services.
In a recently emerging trend, several promotional offers were unveiled this week by Web hosting companies seeking to attract the customers of distressed providers.
On Tuesday, AT&T announced that it was "aggressively enhancing" its hosting transition program to respond to the needs of customers of financially troubled providers. AT&T is offering several incentives including flexible financing options, complimentary installation, expedited contracting, service assurance guarantees, equipment transport, customer support, and aggressive and immediate pricing. Prior to Tuesday's announcement, AT&T had already signed up 30 customers to the program.
On Wednesday, RagingWire announced the rollout of its own transition service, the "Lifeline Relocation Program." The Lifeline Relocation Program provides immediate managed services and IT infrastructure solutions to companies looking to leave distressed providers. Under the program, customers will receive migration assistance, zero-downtime transition, reduced non-recurring costs, and up-front free rent to offset the costs of relocation.
On Thursday, Nacio and Qwest unveiled their own relocation promotions.
Nacio's "Relo Promo" includes four separate incentive programs for transitioning customers that sign up for contracts of 12 month or longer. Nacio will also provide free consulting services, which includes the joint design of a migration plan and a seamless "zero downtime transition."
Qwest announced its program called "Migrate to Stability." Under the terms of the promotion, Qwest is offering customers a transition to a Qwest CyberCenter and two free months of dedicated Web hosting services. The company said the offer would run through August 31, 2003.
And on Friday, NaviSite introduced a re-location program as well.
Finally, the week saw the latest development in the licensing battle between IBM and SCO that could have significant implications for the Web hosting industry. On Tuesday, SCO followed through on its threats to revoke IBM's rights to use or distribute the Unix source code. SCO also announced that it was filing a further amendment to the original complaint in an effort to have IBM cease all use and distribution of the Unix code and destroy any that still remain in its possession. IBM responded by saying it did not acknowledge any wrongdoing.
The Web hosting industry's consolidation process continues as the week saw the usual high volume of activity in the mergers and acquisitions arena. And in a trend that has taken off in recent weeks, many companies emerged with special promotions targeted at the new customer pools created by bankruptcy and the recent high profile exits from the Web hosting market by the likes of Sprint and Cable & Wireless. As consolidation continues, the industry is likely to see similar promotions in the weeks ahead.