By Liam Eagle, theWHIR.com
September 6, 2005 — (WEB HOST INDUSTRY REVIEW) — Canadian Web host Peer 1 Network (peer1.net) announced on Monday that it would acquire the dedicated server assets of Interland (interland.com) for $14 million.
The deal follows discussions that had been reported to be taking place as early as July.
Interland, until recently one of the largest Web hosting companies, appears to be narrowing its focus, having sold its Hostcentric shared hosting assets to Caird Corporation in May of this year.
Peer 1 says the acquisition positions the company to become a leader in “high performance Internet infrastructure.” The company, originally a colocation and network provider, began its move into dedicated hosting in October of 2004 with the acquisition of Web hosting provider ServerBeach for $7.5 million.
“The accretive acquisition of Interland’s dedicated server assets is a key strategic element in the evolution of Peer 1 Network,” says C. Geoffrey Hampson, president and chief executive officer of Peer 1. “This transaction adds a large customer base, skilled staff, solid dedicated server equipment and three data centers to Peer 1 Network’s existing infrastructure. Add that to Peer 1′s specialization in customer service and high performance network, and the innovation of our subsidiary ServerBeach, and you have an outstanding fit.”
The deal trims Interland’s business considerably. The approximately 8,300 dedicated servers and data centers in Atlanta, Miami and Freemont, California accounted for approximately 37 percent of Interland’s revenue during the nine-month period that ended May 31, 2005.
But Interland says the move will create “significant savings,” reducing expenditures associated with new hardware purchases, bandwidth contracts and a significant number of employees. The company says it plans to use the opportunity, and the proceeds of the sale, to renew its focus on shared hosting, and the small and medium-sized business market.
“The sale of the dedicated server assets is an important milestone in our restructuring plan and allows Interland to invest in our core lines of business – providing Web sites and online services to small and medium-sized businesses,” says Jeffrey M. Stibel, CEO of Interland. “This transaction gives the company increased financial flexibility and is the first step toward focusing on our core competencies while realigning our revenues with high margin, high growth business initiatives.”
According to Interland, the dedicated customers, which account for approximately five percent of Interland’s total customer base, “should experience no immediate change in services and should receive continuity of Web site operations under Peer 1 Network.” The company says it aims to make the transition seamless for customers and employees.
Interland employees will continue to operate the dedicated server business under Peer 1′s management for approximately 90 days following the closing of the deal. Peer 1 will have the option to offer more permanent employment to those employees during that transition period.
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