Dec 16, 2001 : The The webhost industry: week review

📅 December 16, 2001 - It was an up-and-down week for the Nasdaq as doubts about when the U.S. recession would end drove stocks lower throughout the week.
Job cuts seemed to be a popular theme in the tech industry this week, with two major telecommunications providers announcing they would cut significant portions of their workforce.
On Thursday, broadband communications firm Qwest said the company would cut 7,000 jobs from its workforce because of sluggish sales. The cuts, which are expected to be completed by mid-2002, will bring the company's overall workforce from 62,000 employees to 55,000.
"The job reductions come as Qwest continues to streamline its business to meet lower customer demand from a deteriorating economy," a release from Qwest said.
Investors initially did not react well to the news, but the stock climbed Friday, closing at $12.33 - about a 50-cent gain for the week.
BellSouth, the third-largest phone company in the United States, said Thursday it would cut 1,200 jobs, or 4 per cent of its workforce, to compensate for a lack of demand for local telephone services.
The company said it would offer a voluntary separation package to affected employees and hopes to achieve most of the reduction on a voluntary basis.
"Our business is not immune to the larger economic forces in the market," said Rod Odom, executive vice president, BellSouth Network Services. "The reductions we are announcing are tied to an economy that has slowed significantly over the course of the past year and to a resulting drop-off in the volume of demand work we have been experiencing."
As was the case with Qwest, investors took the cuts as good news and shares in BellSouth picked up close to a dollar on the week, closing at $38.74 Friday afternoon.
In brighter news, Savvis Communications said Thursday it had been selected by Continental Airlines to provide the network for the airline's e-commerce initiatives and its employee intranet or extranet. The network services provider will supply Savvis with access to the company's network Houston, Texas, where the airline is headquartered.
Shares in Savvis closed at 73 cents Friday afternoon, gaining about five cents on the announcement.
On Wednesday, Vancouver-based hosting firm NetNation Communications said it had signed an agreement with Irwin Toy to host the toy and game maker's new Web site, including its online product catalogue, which includes a database showcasing hundreds of Irwin Toy products according to country availability.
Shares in NetNation, which rose above the three-dollar mark temporarily Friday morning, finished the week at $2.80.
Also on Wednesday, IBM Canada and the National Bank of Canada announced the signing of a ten-year IT outsourcing contract worth a whopping $1.1 billion (CDN). IBM has been providing IT services to National Bank of Canada since 1994, and the new contract will extend the existing relationship to 2011. Under the agreement, IBM Global Services will continue to manage the operations of the bank's IT infrastructure, which include its Web environment and call centers.
The managed hosting landscape got a little more crowded Tuesday when telco giant WorldCom and Digex, its newest affiliate, announced the introduction of a new managed Web and application hosting portfolio geared toward small- to medium-size enterprises. Offered in 12 different configurations, with base prices ranging from $1,320 to$2,500 per month, Managed Express Hosting solutions are now available in the United States, the first quarter of 2002.
"The idea behind it is to take the engineering and innovation that we have pioneered and built for the corporate marketplace and 'mass-productize' that to target solutions toward the small to mid-market enterprise," said Ron McMurtrie, WorldCom's Vice President of Global E-services.
Shares in WorldCom finished the week at $14.75, down about 75 cents from their open on Monday.
And finally, British telecommunications firm Cable & Wireless continued its acquisition streak Monday when the company purchased the Japanese assets of now-defunct ISP PSINet for $10.2 million (approximately 1.3 billion yen). Last month, the company picked up most of the assets of Web hosting firm Exodus Communications for about $850 million (US), including the assumption of about $270 in assumed liabilities. And in May, C&W purchased US-based managed hosting firm Digital Island.
Shares in C&W, which trade on the NYSE in North America, closed at $14.51 Friday for a loss of approximately 70 cents on the week.
Looking ahead to Monday, many are expecting a less-than-stellar week as corporate profits continue to fall and doubts for an economic rebound continue. As Christmas approaches, however, maybe Santa will arrive early and deliver good economic news and fortunes to investors.