July 15, 2005 — (WEB HOST INDUSTRY REVIEW) — According to sources, Vancouver-based colocation provider Peer 1 Network (peer1.net) is in discussions to acquire Interland’s (interland.com) dedicated hosting division.
The news comes less than a year after Peer 1 acquired Texas-based dedicated server specialist ServerBeach for $7.5 million, marking the company’s entry into the dedicated hosting space. With a second major acquisition possibly on the horizon, Peer 1 would be positioned to substantially upgrade its market presence.
Details of a possible deal are not clear, but it appears that Peer 1 has its sights set on Interland’s base of approximately 13,000 dedicated servers. It is not likely that Peer 1 would be interested in much of Interland’s dedicated infrastructure, since it already operates several data centers in North America and acquired significant assets from the ServerBeach purchase.
Andy Schroepfer, founder of Tier 1 Research (tier1research.com), says the acquisition would be good thing for Peer 1.
“If Peer 1 is to acquire some additional customer base, that is a wise move since their hosting operation is really little more than ServerBeach.”
Rob Goff, telecom analyst at Haywood Securities (haywood.com), says there are some potential synergies in such a deal and that the rationalization of the dedicated hosting industry would be a positive.
But if the deal were indeed just a customer purchase, Schroepfer cautions that Peer 1 could incur some additional expenses, unless Interland pays for a possible server migration or accounts for the cost in the purchase price. “Migrating customers in the low end space has always involved more risk than upside,” he says.
Interland has been one of the hosting industry’s main consolidators, building its business through a series of aggressive acquisitions. The company’s dedicated arm expanded with the purchase of various assets such as AT&T’s dedicated hosting clients and most notably the operations of managed host Dialtone.
But after over a dozen acquisitions, Interland appears to be interested in unloading some of its business. In May, the company sold its Hostcentric division to Caird Corporation for $3.4 million dollars and announced it would close its Orlando data center and terminate 35 employees. Rumors of impending sell-offs continue to circulate in industry circles.
Peer 1 declined to address the rumors and Interland did not immediately return calls requesting comment.
