Web Hosting Year in Review: 2005 - Telecoms Catch Acquisition Fever
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Excitement about the money to be made in web hosting may well have awakened some sleeping giants. Take Cable & Wireless, for instance. The UK-based telecom and enterprise hosting company last made a move in the web hosting space way back in early 2004, when it sold its US hosting arm to SAVVIS. This year, it put up $1.08 billion – with a “b” – to purchase managed and application hosting provider Energis. It seems like a high price to pay, but the deal includes Energis’ four hosting data centers: two in Leeds, one in Walford, and one in Dublin. Together, the four data centers boast a total of 213,000 square feet.
When it comes to telecoms, though, some of the most exciting deals happened right here in the United States. They started fairly early in 2005 at that. Those of us who were around when the government broke up the monopoly that AT&T held on phone service in 1983 all but wondered if history was reversing itself.
In January, SBC Communications acquired AT&T in a $16 billion deal, thus becoming the largest telecommunications company in the US. Naturally, this increased SBC’s web hosting profile – remember those 28 data centers owned by AT&T? Let’s not forget that AT&T also boasts some really well-known clients, such as Kodak, Marriott, and several agencies of the U.S. government. After the merger, SBC took the step of dropping its own name and deciding to have the merged company be known as AT&T. SBC’s giving up its own name might seem like a surprising move, given that it was the purchasing company; then again, it’s hard to beat a name with nearly 130 years of brand recognition behind it.
The other big telecommunications deal of 2005 was a bit more contentious. MCI managed to emerge from the largest bankruptcy in history, and was looking for a buyer. Two companies expressed their interest: Verizon and Qwest. It’s no wonder that MCI attracted more than one suitor, either; it brought quite a lot to the table. It boasts an extensive national infrastructure, a strong corporate customer base, and did we mention what it gained from buying managed hosting company Digex? At the time, MCI was the world’s ninth largest web host, home to 878,000 names, including high profile clients such as The Weather Channel.
In mid-February, it appeared that Verizon had won MCI’s favor, with a deal worth $6.7 billion. It turned out that was just the beginning. Qwest made an offer worth $8 billion. After some more back and forth between its two suitors, MCI finally closed the deal in May, with Verizon, for $8.5 billion.
These acquisitions, though, were just two among many moves by telecommunications companies to enhance their web hosting offerings. Bellsouth, for instance, moved its shared hosting infrastructure in-house, in order to gain greater control over its product roadmap. XO Communications expanded its managed hosting offerings, thanks to a partnership with NEXL Systems. In short, hosting, both of the consumer and enterprises variety, is gradually becoming more important as a key service offered by telecommunications companies.
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