Dec 21, 2001 : The The webhost industry: week review

📅 December 21, 2001 - Political turmoil in Argentina and a flurry of warnings Wednesday and Thursday erased some promising gains made earlier in the week.
After flirting with and finally passing the 2,000 mark Tuesday, the Nasdaq was dragged considerably lower afterward on warnings from such heavyweights as Juniper Networks and the collapse of Argentina's government leadership.
There was a fair bit of good news out of the Web hosting sector this week, including a surprising comeback story. Shares in national broadband service provider Covad Communications had a rollercoaster week after the company emerged from bankruptcy protection Thursday. The company, which filed for Chapter 11 in August, "eliminated $1.4 billion in debt by paying its bondholders the court-approved combination of cash and 15 percent ownership of the company," a release from Covad said.
Because of the negative news and events surrounding the telecom industry this year, Covad's recovery was doubly impressive to many. "Fewer than 5 percent of telecom companies emerge from Chapter 11," Jack Williams, executive director of the America Bankruptcy Institute, told CBSMarketwatch.com.
Shares in Covad, which traded in the 30 cent range during the summer, were trading at $2.36 heading in to Friday afternoon.
There was a shuffle in management at Denver-based managed Web hosting firm Verado Thursday after the company said J. Thomas McGrath was "no longer President and Chief Executive Officer of the Company." CFO Steven D. Butler was named President and Chief Operating Officer, and will also retain his position of Chief Financial Officer.
Web hosting firm Interland, which focuses on providing hosting services to the SME market, released its quarterly earnings Wednesday. The company reported revenues of $24.9 million for the quarter, exceeding guidance. It was the first full quarter for Interland since merging with hosting giant HostPro.
"Our merger integration efforts and focus on increased efficiencies and higher-margin revenue are already showing positive results, reflected in our EBITDA progress and gross margin improvement," said Joel J. Kocher, Interland's chairman and CEO.
Investors reacted well to the news, pushing shares in Interland from the two dollar range to $2.55 by Friday afternoon.
On the products and services side, tech giant IBM announced Tuesday an initiative to accelerate the adoption of Linux among small and medium-sized businesses. The company introduced the Linux Test Drive for its eServer iSeries, which provides clients with a "virtual Linux server" to help independent software vendors and the open source community write and port their applications to Linux on iSeries.
Also on Tuesday, enterprise hosting firm Digex said it had been chosen by InfoVista, a provider of service assurance software solutions, to host and manage its extranet, which is accessed by over 50 partners. On Wednesday, the company said Ford Motor Company had renewed its contract with Digex to provide managed hosting services for over 300 servers for Ford's global Internet initiatives.
Despite the news, shares in Digex tumbled from about the $2.90 range Monday to $2.14 late Friday morning.
And finally, broadband services firm Level 3 said Monday it had launched a new MPLS-based Ethernet private line service in the U.S. and Europe. The new service offers customers secure Ethernet-based data transmission to and from 33 cities in the U.S. and Europe over Level 3's network. The company also announced plans to offer MPLS-based ATM and Frame Relay services in early 2002.
Shares in Level 3 were trading at $5.07 heading in to Friday afternoon.
Next week will be shortened by the Christmas holidays. By late Friday morning, many investors were in a buying mood because of buoyed consumer confidence and hopes of brighter days ahead in 2002. It will be interesting to see if the momentum carries in to next week.