Nov 21, 2003 : The webhost industry: week review

📅 November 21, 2003 - Those of us that follow the Web hosting industry have been wrapped up in the details of Cable & Wireless's slow progression out of the Web hosting business in the United States, with the new details and speculation that appear each week overshadowing much of the industry's other news. This week again saw developments from C&W, but it also revealed some news of more immediate impact, as the reorganizing MCI completed its acquisition of long-time collaborator Digex.
MCI said on Monday that it had completed its tender offer for all the outstanding shares of Digex Class A Common Stock, accepting all the shares that were validly tendered as of the offer's expiration at 5:00 pm on Friday. The company said the preliminary results showed that 19,114,996 shares were validly tendered. When combined with 347,346 shares subject to notice of guaranteed delivery, the shares represented about 76.3 percent of the outstanding shares of common stock, surpassing the minimum condition that at least 74.3 percent of outstanding shares be tendered in the offer.
On Thursday, MCI announced that it had completed its merger with Digex, a process the company had said in its previous announcement that it intended to complete as quickly as possible. As a result of the merger, said MCI, Digex has become an indirect wholly owned subsidiary of MCI.
Along with the big news from MCI, however, there were several new developments in the ongoing Cable & Wireless story, including some unexpectedly good news.
On Wednesday, theWHIR reported that Cable & Wireless had signed more than 800 new service orders from approximately 450 unique customers during the recently completed third quarter, a difficult period for the company in many other respects. According to C&W, the orders represented over $32 million in new revenue. The company said it continued to exceed month-over-month restructuring goals and remained ahead of target for data center consolidation, customer churn reduction and cost controls.
On Friday, reports were published indicating that C&W CEO Francesco Caio had said it was unlikely the company would be able to exit the US Web hosting business by the end of the year. At an investor conference organized by Morgan Stanley, Caio said the company's deadline for completing the process, first announced in June, was the end of next year.
In addition to the big news of acquisitions and sales by the major carriers, there was a collection of announcements this week from other companies involved in the Web hosting business, offering the details and results of their latest fund-raising efforts.
On Tuesday, XO Communications announced that it had raised $161 million in paid subscriptions for approximately 32.2 million shares of new common stock in the initial stage of a rights offering priced at $5 per share. The company said the first stage of the offering ended November 14, and that XO would offer the remaining 7.8 million shares, out of 40 million, at the same price in the second stage, set to begin in December. XO said the proceeds of the offering would be used to lessen existing secured debt.
Also on Tuesday, data center service provider Equinix announced that its underwritten public offering of 4.5 million shares of common stock, one million shares larger than originally announced, would be priced at $20. The company says the transaction is expected to close November 21, and will generate approximately $85 million in net proceeds. Existing stockholder STT Communications Ltd. Purchased 1,535,948 shares in the offering.
And on Thursday, Web hosting software provider Sphera said it had secured $4 million in Series D financing, with all of the funds coming from existing investors. The company said the new round of financing was intended to accelerate Sphera's business development, and would be used to build the company's infrastructure in high-potential markets, strengthen its technology portfolio, increase sales and marketing initiatives and enhance support for global customers.
As 2004 nears its conclusion, it appears as though one of the year's biggest stories, the departure of Cable & Wireless from the US Web hosting business, will likely not see a conclusion of its own for some time. There is little doubt, however, that the continuing process will continue to produce developments worth keeping an eye on.