Jun 7, 2002 : The webhost industry: week review

📅 June 7, 2002 - Nothing quite hangs in the headlines like a high-profile failure, especially that of a telecommunications company that had held a serious stake in the operations of the Web hosting industry.
Such is the case with European telecommunications provider KPNQwest, which filed for bankruptcy protection earlier in the month, and whose failing fortunes have served to maintain its unhappy position as the center of attention as the industry awaits news of the inevitable. Reports this week said KPNQwest could shut down its network as soon as Monday, if a new plan proposed by the company's trustees is not given the support it requires from customers, suppliers and employees.
"Should inadequate funding be received prior to the commencement of the plan at the close of business on Monday June 10," said a statement from the trustees, "the network will be shut down, and all monies received will be reimbursed in full."
The company had previously notified its customers of the trouble it might have keeping its network online, and suggested they make contingency plans. Several European network providers responded this week by announcing programs designed to win them consideration for those contingency positions.
Telecommunications firm Interoute announced on Tuesday that it has developed a "Rescue Package", specifically designed to help transition KPNQwest customers to Interoute service.
Interoute's package promises to meet any KPNQwest service level agreements and match the company's pricing for its services.
In a more subtle but equally timely announcement, telecommunications company Global Crossing said on Thursday that plans to support "beleaguered" European businesses by promising a quick transition to its own global IP network in as little as 24 hours.
No stranger to bankruptcy, and the restructuring process, Global Crossing said that through its restructuring it has remained focused on satisfying customer demands and maintaining its network at peak performance.
On Friday, Swedish telecommunications group Telia announced that it has seen a major jump in orders for its services following the announcements of KPNQwest. Many of the orders, says Telia, came through the company's Shadow Network Solution service, which allows customers to secure capacity from Telia if their provider's service is interrupted.
KPNQwest wasn?t the only telecommunications firm to see hard times, as reports on Wednesday suggested the communications giant WorldCom is considering tabling a proposal that would cut 16,000 jobs, or 20 percent of the company's workforce, mostly in network operations.
Through this year and last, WorldCom has already cut close to 13,000 jobs.
While there was little development in the talks between KPNQwest and reported suitor AT&T, there were other acquisitions completed this week, some under similar circumstances.
Internet services firm Fastnet announced on Monday that it had completed its acquisition of selected assets from bankrupt managed Web hosting firm Applied Theory Corporation.
The deal involved the sale of AppliedTheory's network business, including its high capacity backbone network and related equipment, and is expected by Fastnet to add $15 million to the company's revenue.
On Friday, IT management solution provider ClearBlue Technologies announced that it had purchased the managed hosting assets of AppliedTheory in the company's bankruptcy auction last week.
ClearBlue will acquire the company's managed hosting and development services businesses, including its corporate assets, intellectual property and a number of customers.
On Thursday, Web hosting provider SRM networks announced that it had delivered a letter of intent to purchase issued and outstanding shares of wireless data streaming firm weComm in a reverse merger. The deal will involve up to $1.5 million of SRM's 8 percent convertible notes.
The Web hosting industry also witnessed developments in legal matters relating directly to the way business is conducted.
Communications firm XO Communications announced on Tuesday that a federal judge had dismissed its shareholders? class action lawsuit alleging that the company's officers had violated federal securities laws. The company said it was pleased with the court's decision, and is considering a variety of reorganization options in an effort to get its struggling business back on track.
And on Thursday, domain name registrar Go Daddy Software filed a lawsuit against its leading competitor VeriSign alleging false and deceptive advertising, interference with customer relationships, misappropriation of trade secrets and consumer fraud.
The Go Daddy suit is in regard to a questionable VeriSign marketing campaign that targeted Go Daddy customers with misleading "Domain Name Expiration Notices." It follows similar litigation by registrar BulkRegister, which resulted last month in a preliminary injunction against VeriSign.
Much of the news this week centered on the failing telecommunications firm KPNQwest, as its trustees raced in the eleventh hour to keep the company's network online. The outcome of their efforts will become clear early next week, and there are likely to be a lot of organizations looking for new network providers whether or not KPNQwest's network shuts down on Monday.