I have been reading some great data about web host firms going green. Power from alternative energy sources, buying those carbon thingies. Wind, rain, gravity, solar winds, being more efficient, telecommuting, all those enchiladas.

The US Government is building a massive data center in the bottom of a quarry in West Virginia. After its complete, gravel will be back filled in and apparently natural water will circulate. A great way to off load all that data center heat and shield yourself from a nuclear incident at the same time, a twofer.  Green I would say.

At home we have gone greenish. My wife has me using those cloth bags at the grocery, holds 12 packs of Moosehead really well, square no sag, strong handles and some insulating properties. We use a sailboat vs. motorboat.

It is hard to find a way for a company like mine to go greener. The A/C is already up to 80, the hot water heater is turned off (In the summer you can do that in Florida) and we turn off the printer at the end of the business day.

So I want to buy a new green CAR…which is why I wrote this blog...so you would click on the word CAR.

We are all learning how to dump the box. 

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At HostingCon attend my M&A seminar "Flip that Hosting Company" 

I am moderating a panel at HostingCon entitled "Flip that Hosting Company" (Wed. July 30 - 4:15 PM). I want to have at least one panel member from our WHIR readers.

So be on my panel. If you think you are up to it, there are just a couple of hoops to jump through.

1 - Requirements: During the last 5 years you should have completed at least 3 acquisitions, your current position is either in senior management, or you are responsible for business development for an operating hosting firm.

2 - How to apply - send me an e-mail that includes:

    A - Your Name/Company/Title/Phone and link to your website.

    B - Write a couple of paragraphs on what you bring to the table. How you will add value for HostingCon attendees and a snippet of your background.  

    C - A paragraph regarding a specific point you look at (or reared its ugly head) during an acquisition, and why it was important to your decision making process.

Brevity and succinctness are virtues.

All applications are due on or before by Monday June 10th.  BTW I reserve all kinds of rights including not to select anyone.

AND THE WINNER RECEIVES…a free pass to HostingCon.

I can't wait...Tom 

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April was a bit more active than March. I am getting some good "vibes" pre HostingCon and ISPCON was better than expected. My firm closed a couple of transactions which is always nice. So here we go...

Laguna Niguel, CA -- Alentus Corporation (ALNS) acquired Austin, Texas-based Website Source, Inc. (Shared) and SpeedFox, Inc. (Dedicated).  The deals add $2.6M in annual revenue to Alentus. Tom Millitzer President of NCC-New Commerce Communications (This blogger) represented Website Source and Speedfox in the transactions.

Dublin, Ireland - Digiweb, has acquired web hosting Novara, as well as its host.ie and register.ie brands. Digiweb serves 22,000 hosting customers, 32,000 broadband customers and has 140 Employees.

Boston, MA - ABRY Partners acquired Raleigh, NC based Hosted Solutions for $140 million. Hosted Solutions has several East Coast data centers and provides managed services. Paul Stapleton of DH Capital represented Hosted Solutions in the transaction.

Scottsdale, AZ - Vilocity Interactive Inc. recently expanded its client roster and presence on the East Coast with the acquisition of a Boston-based WebNesting a hosting and site development firm.

San Mateo, CA – SAS provider Etelos, Inc.   (Public, OTC: ETLO) completed reverse merger into Tripath Technology. Company has a market cap of $210 million.

Nottinghamshire UK - Timico Group acquired Twang.net Limited, a UK-based a specialist in fully managed solutions.

Renton, WA - Parallels, has acquired ModernGigabyte, the ModernBill automated billing system and other hosting automation solutions. ModernGigabyte provides software to nearly 15,000 hosting resellers with more than 2 million customers worldwide.

Plano, TX - Layered Technologies, Inc., acquired of FastServers.net, a Chicago-based managed hosting company. I ran into FastServers founder Ian Andrusyk at ISPCON…he was very relaxed.

Mississauga, ON - Hostopia (TSX: H) acquired the customer assets of Web hosting provider Luxomovera, operating as uplinkearth.com. Reportedly an all-cash offer that will migrate some 12,500 customers Hostopia's facilities.

Fairfax, VA - mindSHIFT Technologies acquired Collaboration Online, better known as groupSPARK. Collaboration Online provides Shared & Dedicated Exchange data center and other server side services.

Obviously not all inclusive - but from the NCC files.

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Meet me at Hostingcon and attend my M&A session. 

This is a no-brainer that can be hard to do. Family, friends, schools, pets all figure into the situation. But is should be on your plate.

Here are some of the top rates for state income taxes; Vermont 9.5%, Oregon 9% and New Jersey 8.97%.

Now there are many other states with high state income taxes. The California State Motto is Eureka "I have found it!" is aptly stated. After all California has a 9.3% state income tax rate plus a 1% kicker imposed on taxable income over $1 million. If I read the tax codes right that equals 10.3%.

Since it makes my case, let’s look at the worst case. You net $500k from your hosting business. In California you pay about $45k in state income taxes and another $155k in Federal Income Tax. So 40% goes to the government. Not to mention FICA, 8.5% sales tax etc.

So you decide to sell the business, it sells for $5 million. In California that adds about $500,000 of your money to the state coffers. You get $500k less. Your retirement fund just dropped $500k. That Ivy League school for the kids is a bit tougher to handle.

Do some family planning. Move to Florida, it has zero, nada, and no state income tax. So does Alaska, Nevada, South Dakota, Texas, Washington and Wyoming.

Now the M&A Part – Buyers don’t make up for the sellers shortfall. It is just as easy to buy a company in Texas as in California. Think this one over for a while.

So talk to your attorney and accountant, make sure everything’s legal and makes sense. Then come on down to Florida a couple years before you sell. You could add some $600k to the retirement fund. Oh yes, real estate is a bargain since the bubble burst.

Written from Cape Coral, Florida - Rather than our old Milwaukee diggs (6.75%)

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In Superman III Richard Pryor is a computer programmer; he wonders where all those ½ cents at the end of payroll checks go. He puts them to good use...his paycheck. 

Charles WU - head honcho at CW Labs made one of those ISPCON luncheon presentations that was actually interesting. In the middle of it I thought...this guy looked at something boring...and saw billions. All of a sudden it became very interesting. 

Unbeknownst to us he noted the slow death of dial-up. But sees dollars in that slow bandwidth...forget 56k...he likes 28k. Forget something in the future that may not work like 500 HDTV channels over the Internet, R&D is always a *itch...lets make some money.

During the presentation Charles used the word trillion...his graphics showed a bunch of lines connecting each other, sort of like a half circle, with arrows going back and forth. His R&D staff has invented some stuff, they want to put the ISP in this graphic. Somewhere near the top left, second dot down. He called it the money spot.  

Charles WU wants to put the ISP in the credit card processing system. He wants you to be part of that trillion dollar economy, the part that takes a ½% here and ½% there. Swipe that card and a bunch of people takes a slice of that swipe…someone has to do it.

Talk to WU if you want to understand the technical part, not my area. However there is hardware, software, intellectual property, licensing and other stuff involved.

In the evening Wu kindly gave away food and drinks as we gambled at a charity event. Everyone was happy.

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Possibly you have seen the TV drama NUMB3RS (CBS Friday) and met Charlie Eppes. He is that ex-child prodigy that riddles off obscure math theories and saves the day for the FBI and that guy from Northern Exposure.  There is always an algorithm in the mix, you know the stuff you and I write in the mist on the shower door.

Enter stage left is Julie Bellancam a real life Charlie Epps, but in the guise of a mild mannered MIT grad. That Julie Bellanca the Product Design Director for Cleversafe. Julie Bellanca  the articulate, intriguing and driving force leading a Cleversafe team of almost 40 (probably also MIT grads) that have written some great algorithms that may have the chance to reinvent the data center industry

She actually used the word “slice and dice data”……when she told me “Our technology, called Information Dispersal, works similarly to TCP/IP packets--that is, we store information on data slices, storing these slices on a network of local or remote servers. So, information is, well, dispersed.” Words actually from the website but it sound just like Julie.

So what is the big deal? This is how I understand the magic…Lets say you are a data storage firm and have three big data centers (you don’t have to be big but I like big number3s). These three data centers each have 33,334 servers. You own 100,002 servers. 50,001 of them are in some effect useless because they back up the data for the other 50k.

One server goes down ----- ok a whole data center gets hit by a tsunami…global warming is everywhere.   Live is good, the server in Austin has the data lost in San Diego (sorry San Diego), yes the critical data for Abercrombie & Fitch is saved.

Cleversafe has another approach --- and you only need 50,001 servers. You stuff the data in small slices in maybe 18 locations. When the tsunami hits San Diego,  Cleversafe’s equipment, software and knowledge can fill in the blanks…you lose nothing…you save 50,000 servers. Algorithms…magical recreation. Are these mathematicians or alchemists?

Cleversafe released this product in Q1 2008. Neat stuff, new stuff, you want one.

And now you know how they fill in those little data holes in the opening of NUMB3RS.

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I host an M&A seminar at 4:15 at ISPCON this afternoon (5-14-08) 

 

I was going through my files --- then again and again ---- March was a slow month…but April will be better – at least my firm did three.

Lynchburg VA – Sitestar (OTC: SYTE) bought the assets of Comcation, an Internet service provider whose services also include web hosting. As a side note Sitestar’s CEO, Frank Erhartic has agreed to be on an M&A panel this blogger is moderating at ISPCON.

Australia -  MYOB acquired Ilisys Pty Ltd one of Australia's larger web hosting providers. MYOB provides accounting software and payroll software to more than 700,000 businesses worldwide.

Glendale, CA -  Pro Net Hosting acquired Homepage Universe which doubled the firm’s size to over 100,000 shared and dedicated hosting domains.

Denver, Colorado - ViaWest, acquired Dallas based Dataside. With the Dataside acquisition, ViaWest's annualized revenue will exceed $100 million by the fourth quarter of 2008.

London -  Freedom4 Communications PLC, signed an agreement to sell its Hosting and Network Services Division to Host Europe WVS Ltd for 120.0 mln stg. ($235m)

Minneapolis -  VISI acquired Infinity AccessNET, a business-focused Internet Service Provider. 

Obviously not all inclusive - but from the NCC files.

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“Certainty? In this world nothing is certain but death and taxes.” Except for not patenting electricity Benjamin Franklin is usually correct.

In regards to the life cycle of your web hosting company his timing is impeccable.

Your company should do everything possible not to pay taxes. You can either give it to the government, great benefit there, or grow your business and hence the economy. Hire more employees (let them pay taxes), spend money on capital equipment and that whole channel line pays taxes. But remember you don’t want your company to pay taxes. Not on April 15th.

Smart and profitable industrialists, hopefully like you, avoid taxes. That is one of the commanding reasons for acquiring a business.  Most web host firms have lousy balance sheets. They have depreciated the assets and have nothing to shield profits, they pay taxes.

I always find it sort of magical that you can acquire an asset (buy a company) that was fully depreciated yesterday, put it on your balance sheet today (stepping up the assets as accounts say) and voila! you have a complete new depreciation schedule protecting your cash. Sort of like asparagus cropping up in the spring, where did that come from?

So you say…“I am profitable but don’t have any money to make an acquisition Tom”. Even a better reason to take out a government loan. That is exactly what not paying taxes is, a differed no interest loan from the government. And if you screw up sort of risk free.  

Now Ben was correct…nothing is certain but death and taxes. In your case the death of your company. Don’t frown, this is just the end of the investment period…maybe the buyer of your company will keep the name, who cares?…your out. Now you want to pay a lot of taxes, big time taxes. You have taken those government loans and parlayed them into your success. As Franklin said taxes were certain, he just did not state when.

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Laguna Niguel, CA -  Alentus Corporation acquired John Macleod’s AO Technologies’ Columbus Ohio Data Center. It is rumored that Alentus is picking up a company across the pond. AO provides high-end dedicated and streaming media services

Leeds, UK -  Masternaut Three X, acquired FibreCity for GBP 6 million ($12 million USD). Deal added 25,000 sq/ft data center.  The acquisition of FibreCity enables Masternaut Three X to provide more extended hosted back-office solutions.

Dallas, TX - Affiliated Computer Services, Inc. (NYSE: ACS)announced an agreement to acquire sds business services GmbH, a Germany-based provider of data center, infrastructure services, and application-related solutions from Waterland Private Equity Investments. ACS will pay approximately $67 million (euro 46 million), including the assumption of liabilities, to purchase sds. The acquisition is expected to close in March 2008 following regulatory approval.

Charlotte, NC - TITAN Technology Partners, a provider of hosted and managed industry solutions, acquired Singapore based ESP Consulting.  ESP operations is and managed services provider focused on delivering SAP solutions.

Belfast, Ireland - IUTV Media plc today acquired of Tibus, a leading Ireland web development company from Anderson Spratt Group Holdings for GBP 5 million ($10 million USD).

Chevy Chase, MD - Opus8 Inc. affiliate, Clear Day Acquisition Corp., has acquired a controlling interest in Lore Internet Systems. Terms of the transaction were not disclosed.  Lore services includes, managed datacenter hosting and co-location. The acquisition has approximately doubled Pro Net's size and it is now providing shared and dedicated hosting for over 100,000 domains.

Sao Paulo, Brazil  - Universo Online S.A. (UOL) acquired the "clients" of web hosting company Digiweb  UOL is now the third-largest provider of web-hosting services company in Brazil. See my March 6, 2008 blog for additional information and comment.

Rochester, NY - Layer 8 acquired the Web hosting and information technology support services branch of DigiNex. RACD

Obviously not all inclusive - but from the NCC files.

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Last week Universo Online S.A. (UOL) acquired the "clients" of web hosting company Digiweb, also of Sao Paulo, Brazil. In November, UOL also acquired the web hosting "clients" of Plug In another Brazilian firm.

The importance:  UOL is now the third-largest provider of web-hosting services company in Brazil.

UOL did not mention the "third largest" part after the Plug In acquisition --- letting me believe that Digiweb was a fairly large deal.

I check out UOL - Basically an Internet/media powerhouse. They are vertical, horizontal, diagonal and the karma sutra all rolled into one. You really have to read the corporate bio --- Brazilian portal with 1.4 billion page-views a month, 1.7 million content paying subscribers, 1 million broadband customers…and now the THIRD LARGEST web hosting company in Brazil (Which I may add has a population of 184 million).

They want to collect the tolls on the electronic highway...including all entrances and exits. Someone has to collect.

The UOL financials…some great info…

• My favorite part: "The Company had no outstanding loans or financings at the end of the 4Q07". (Same position as Microsoft)
• They have a lot of cash - $284 million USD.
• 2007 EBITDA - $91.8 million USD - a fantastic 29% of net revenues.
  

The largest shareholder (41%) is the San Palo newspaper owner Folhapar.

UOL stock has dropped some 60% in the past 12 months...but the one thing I know about newspapers, they are long term players with long term visions. 

And the movie Brazil... 

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First we will start with an alert---because timing can be everything.

Marbles… One of the most important parts of any transaction is how many marbles you get to keep. If you are considering selling your company in 2008, 2009 or 2010 please run down (not just trott, put off til' tomorrow...I said RUN) to your tax accountant. If it would be a stock sale, which frankly you really don’t know today, you could be in trouble.

Why? The Bush tax reductions will soon start to evaporate, specifically the long term capital gain treatment which expires December 31, 2008 ---- yes a short 10 months away. In a stock transaction it could cost you another 5% in taxes.

Well it is only 5% some people may say. Yes but it takes almost 7% to make that up after paying taxes on the incremental amount you need to cover the poor timing.

So if you are considering selling in 2008 you should start earlier than later. And if you are considering 2009 ---- think again.

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