May 10, 2002 : The webhost industry: week review

📅 May 10, 2002 - Thanks to Wednesday's rally on Wall Street, when the Nasdaq picked up 122 points and the Dow 305, it was easy to get ahead of yourself and start daydreaming of a surging tech sector.

Thursday brought everyone back down to Earth, however, as markets gave back about half their gains. And if the week's events in the telecom and Web hosting industries are any indication, there won't be any smooth sailing for quite a while.
But before we get to the doom and gloom, we should first mention the Web hosting industry's biggest story of the week: on Tuesday, Web hosting giant Interland said it had acquired Florida-based managed hosting firm Dialtone Internet. Terms of the transaction were not disclosed.
The acquisition is Interland's fourth in the past six months. Since October 2001, the company has also purchased the shared and retail Web hosting business of Interliant, the shared and dedicated Web hosting accounts of AT&T that were related to small businesses, and Missouri-based hosting firm CommuniTech.Net.
Asked if Interland would continue to act as an industry consolidator, CEO Joel Kocher said, "We're just getting started."
Tuesday was apparently a popular day for buying and selling the assets of hosting firms this week, as Inflow, a Denver-based managed hosting firm, also sold part of its business. Data Electronics, an Ireland-based managed hosting company, purchased Inflow Ireland, the Dublin-based wing of Inflow. Data Electronics said the acquisition included Inflow's Dublin data center, which the company opened a little over a year ago. Data Electronics also acquired the right to license FlowTrack, Inflow's data center management software suite that automates the delivery of complex hosting services from a centralized Network Operations Center. Terms of the deal were not disclosed.
The announcement came six days after Inflow said it would reduce its workforce and either close or sell a number of its data centers. Inflow had said at the time it was negotiating terms to sell its Dublin and Dallas, Texas, data centers to local companies.
There was also a bankruptcy filing of note this week: On Thursday, British cable and Internet services firm NTL said it had filed for Chapter 11 bankruptcy protection as part of a pre-arranged re-organization plan.
Under the plan, approximately $10.6 billion in debt will be converted to equity in two reorganized companies - NTL UK and Ireland, and NTL Euroco. The company also said it had received a commitment of up to $500 million in new financing during the recapitalization process from certain members of its bondholder group.
Meanwhile, a report in the New York Times published Wednesday said that troubled telecommunications provider WorldCom expected to borrow $2.6 billion from its banks in order to modify its financing terms.
A source close to the situation told the Times the move is part of an effort by John Sidgmore, the company's new CEO, to reassure customers that may be concerned that WorldCom is on the verge of filing for bankruptcy protection.
"Customers are calling, asking, `Are you going to be around next year?'" an executive told the Times. "That kind of thinking has to be eliminated."
The news out of the Web hosting sector wasn't entirely bad this week, however, as a number of companies continued to join forces in an effort to enhance their offerings, while others rolled out new services. On Wednesday, for example, auction giant eBay and digital trust firm VeriSign said they had formed a new multi-year services and marketing alliance. Under the agreement, eBay will deploy VeriSign authentication services, as well as establish an eBay marketplace for highly sought-after domain names. The companies will also enter into a multi-platform marketing and promotional campaign.
VeriSign also said this week that it had expanded its portfolio of managed security services in an effort to help business with the entire process of designing, implementing, monitoring and managing e-business networks. The company's enhanced services now include managed VPN, firewall, intrusion detection and virus scanning services.
Web hosting giant Verio increased its available service offerings this week by introducing its new Enterprise Modular Hosting Solutions (EMHS), which allows customers to build their high-end server solutions on a selected operating system and application platform in a faster and more easily scalable fashion.
Verio also said it would release a range of other new offerings, including enhanced monitoring services, storage area network, hot database backup, SecureEntrance firewall and BackLink, a service that allows customers to use secondary network capabilities to transfer data between servers.
And finally, we should mention that there seemed to be an uncharacteristically large number of customer announcements this week, likely because of earnings season. As a result, several companies announced they had either signed or renewed some high-profile clients. These included Cable & Wireless, which said Monday that Covisint had signed on for three more years of Exodus services in the US; SAP America, which said Tuesday that that Day & Zimmerman, Hendrickson International and West Pharmaceutical services Inc. had all chosen SAP Hosting for application software and services; Intel Online Services, which said Wednesday it had been selected by Discovery Communications Inc., which operates the Discovery Channel to provide managed Web hosting services for the company's international Web sites and Web applications; and NaviSite, which announced Wednesday that Academy of Art College (AAC) had selected the company as the managed hosting provider for its online education initiatives.
Despite the sudden rash of customer announcements, it was a week of mixed results and announcements overall, with only one major bankruptcy filing to speak of. And while that's still one too many for some, it's not bad for an industry that sometimes announces three to six in a week.