Mar 29, 2002 : The webhost industry: week review

📅 March 29, 2002 - Three major service providers either filed for bankruptcy protection or ceased operations this week, a clear indicator that the financial problems the communications sector have been facing the past few months are far from over.
Scalable Ethernet services provider Yipes Communications Inc. filed for Chapter 11 Monday, citing issues in meeting fixed financial obligations like fiber infrastructure and real estate.
"This proposed restructuring is unavoidable given the unprecedented pessimism affecting providers of capital to the telecom market," said Jerry Parrick, Yipes CEO. "Although our pioneering technology has proven its merits and customer demand for Yipes services is exceptionally strong, the 'perfect storm' now battering the telecom industry has pummeled even the mighty, and we are no exception."
Communications firm Adelphia Business Solutions Inc. also filed for Chapter 11 this week, citing the general decline of the telecommunications industry as the main reason behind its announcement Thursday. The company also said it had reached an agreement for debtor-in-possession financing that would allow it to continue daily operations.
Aside from bankruptcy filings, European managed services provider Worldport Communications, Inc. said Tuesday that its board of directors has chosen to cease operations. The company, which in recent months has given up its Swedish operations and closed its Dublin data center, made the decision to pull out of the United Kingdom, the last one in which the company maintained operations. But although the company presently has no with respect to future acquisitions, the company said expects it will seek new acquisition and investment opportunities in the future.
Another company feeling a financial pinch of a slightly different nature was domain name registration firm Tucows, which sold its shares of domain management firm Liberty Registry Management Services (LibertyRMS), to Afilias Ltd. after demand for top level domains like .info failed to materialize as hoped for. Liberty RMS manages the infrastructure tools, systems and staff that are required to run a Generic Top Level Domain (gTLD) registry, and currently provides registry operations for the .info domain name to Afilias, a consortium of 18 ICANN-accredited registrars.
"The impact of launching the new gTLDs in a difficult economic environment has contributed to monthly volumes being well below those anticipated when Tucows put the infrastructure in place to meet the original objectives submitted to ICANN," said Elliot Noss, Tucows' President and CEO. "These unexpected lower volumes pushed our profitability point beyond the first renewal cycle? this move is designed to enable Tucows to meet its goal of achieving profitability sooner."
Despite the bankruptcies and financial difficulties of some firms, there was an upside to the holiday-shortened week. Web hosting firm Interland, for example, announced revenues of $25.5 million for the quarter ending February 28, an increase of 76.6 percent over the 12-month period. The company also said annualized revenue per square foot of data center space and employee were up significantly.
European Web hosting firm Host Europe also announced significant growth this week in its preliminary annual results. The company, which provides a wide range of Web hosting services across Europe, said pro forma revenues increased by 65% between 2000 and 2001. The company also reported "significant improvement" in a number of important operating metrics, including large increases in domains under management, shared server accounts and total number of dedicated and co-located hosting clients.
A number of companies unveiled intriguing products and strategic alliances this week, including IBM, which introduced its new telecommunications server optimized for Linux on Thursday. The machine, which is based on the company's popular eServer configuration, takes aim at the $4.5 billion market segment for telecommunications servers, where Sun Microsystems currently has a strong presence.
Speaking of IBM, Florida-based hosting provider Dialtone Internet said Monday said that new and existing customers could now order Linux or Windows-based managed hosting services using IBM 200, 300, 342, and 350 eServer series machines. Dialtone said the upgrade represents faster and more reliable server performance for clients, and lets customers host Web sites on IBM brand servers instead of "white servers" or generic machines built in-house.
Meanwhile, a new company named Nauticus Networks came out of stealth mode Wednesday to announce both its company launch and details surrounding its new data center architecture designed to drive new efficiency in the delivery of data center application services. The company said its product line aims to provide a more than 10x price/performance improvement over traditional data center solutions in the areas of application switching, load balancing and SSL.
And finally, telecommunications firm Cable & Wireless said Monday it would introduce three outsourced security solution sets for its Web hosting business under the Exodus Communications brand. The company said its new triad of services would assist customers in identifying potential network security vulnerabilities and manage security systems on an ongoing basis.
It was certainly a busy week for the Web hosting and telecommunications industries considering it will be shortened by today's holiday. As spring gets in to full swing, the telco sector in particular will likely continue to be the center of attention as accounting practices are revealed and financial pressures mount.