Feb 7, 2003 : The webhost industry: week review

📅 February 7, 2003 - It was a big week for big news in the Web hosting industry as a number of companies made major announcements about acquisitions, one company reached a key milestone in its determined efforts at restructuring and several companies announced the release of significant new products that could have considerable impact on the hosting business.
On Tuesday, communications carrier Level 3 communications announced that it had completed its transaction for the acquisition of Genuity Inc. The company says it paid $60 million in cash to Genuity, plus $77 million in cash for prepayments to vendors for network services to be used during 2003. The cash provided by Level 3, along with the cash remaining on Genuity's balance sheet, will be used to repay creditors for Genuity, which filed for bankruptcy protection in 2002.
On Wednesday, e-business software developer Computer Associates International announced that it had acquired substantially all the assets of privately-held storage area network software developer Netreon Inc. Adding Netreon's SANexec Designer to its portfolio allows CA to provide solutions for managing the entire storage life cycle.
On Thursday, managed Web hosting company NaviSite announced that it had acquired managed application service provider Avasta Inc. NaviSite says it will acquire all of Avasta's stock through the merger of a NaviSite subsidiary into Avasta. NaviSite has agreed to issue 231,039 shares of its common stock at closing, and up to an additional 1,004,518 shares of common stock if Avasta achieves certain revenue targets through June of 2003.
And, also on Thursday, it was reported that new Cable & Wireless chairman Richard Lapthorne refused an early-January takeover offer that would have valued the company at about £2.4 billion. In January, Pacific Century Cyberworks, a Hong Kong-based telecommunications operator, sent a letter to C&W's board, announcing its interest in discussing a takeover of the company. Lapthorne reportedly cut off discussions before they began. PCCW has said it is not interested in making any hostile moves to take over the company.
Along with the acquisition-related news, an important announcement came from struggling communications carrier WorldCom as, several weeks into the 100-day plan recently laid out by new chairman and CEO Michael Capellas, the company passed one of the key milestones in its restructuring plan.
The company said it would slash its workforce by 5,000 and consolidate data center space as part of a plan to reduce annual expenses by $2.5 billion. Along with the job cuts, which will be mostly in corporate and administrative positions, the company plans to reduce total square footage by 8.7 million square feet, or 26 percent, along with renegotiating a number of supplier contracts.
In addition to all the news related to business operations this week were several announcements related to product lines, as major suppliers announced some new products of particular significance to the Web hosting business.
On Wednesday it was reported that computer systems developer Sun Microsystems is gearing up to announce upgrades to its high-end server line next week, including faster 1.2GHz processors and the ability to switch out many components without shutting the computer down. Next week, Sun will unveil new 1.2GHz chips for its "midframe" Sun Fire models. The company will also introduce the second version of its capacity on demand (COD) program, which allows customers to switch on and pay for previously unused processors when needed.
On Thursday, computing platform developer Microsoft announced that it has released its High Volume Exchange service, designed to help service providers offer Microsoft Exchange 2000 Server-based Internet messaging services to compliment existing offerings. The collection of technologies, tools and support, including a documented reference architecture, offers service providers a range of new messaging-related services and new revenue opportunities.
While this week's Web hosting news included some interesting new product announcements, the major focus was on the ongoing and widespread business-structure re-thinking that has been taking place throughout the Web hosting and communications businesses. It is interesting to note that while in some cases, such as Level 3, the industry's consolidation continues unabated, while in others, like C&W, organizations don't yet seem completely resigned to that eventuality.