Summer a Season of Change for Europe?s Web Hosts

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Summer a Season of Change for Europe’s Web Hosts
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Adam Eisner, theWHIR.com
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September 20, 2002 – For most businesses, summer is a time to slow down, take vacations and gear up for the fiscal New Year.
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But for many European hosting firms, the
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summer was anything but slow. Several European Web hosts used what is
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traditionally viewed upon as a season for downtime (no pun intended) to
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revamp their strategies or make structural changes to company
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operations.
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One firm that attempted to shift its
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focus this summer was London-based Netscalibur, which made headlines
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last year when it went on a spending that saw the firm purchase six
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companies in eight months. One of its last well-publicized purchases
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was German Web hosting firm Securitas Internet Systems, which
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Netscalibur purchased for £4 million in April 2001.
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By September of 2002, however, the
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company had decided to exit the German market entirely in order to
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focus on higher-end clients centered in the UK and Italy. As a result,
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Netscalibur sold its German operations to UK ISP Claranet for an
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undisclosed sum earlier this month.
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“[Netscalibur’s] German operation
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accounts for a small share of overall revenues and will enable
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Netscalibur to free up resources to accelerate the development of its
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growing suite of IP services,” a release from Claranet said. But while
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Netscalibur is shifting focus, it is not necessarily sending out a
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signal of distress. The company became EBITDA-positive in the second
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quarter of 2002, and says its on course to achieve growth of nearly 20%
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in IP revenues this year, boosted by account wins like a six-figure
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hosting deal with Lycos and a €2.5m contract with Deutsche Telekom in
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Italy.
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One company that has been forced to
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change its strategy in Europe because of more pressing issues is Digex,
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a complex hosting firm based in Maryland. The company significantly
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pared its European hosting operations late last month following a round
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of layoffs in mid-August. Digex reportedly pulled out of facilities it
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leased from bankrupt telecommunications firm WorldCom, its owner, in an
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effort to cut costs.
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Digex had previously said it would not be
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affected by the accounting scandal surrounding WorldCom, which owns the
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majority of the company and holds a 94 percent voting stake in the
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company. In fact, at the time of WorldCom’s bankruptcy filing in
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mid-July, Digex pointed out that it was a separate public company that
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was not included in WorldCom’s voluntary petitions for reorganization.
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The company has also reportedly gone out of its way in the past to
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point out that it is not a WorldCom subsidiary. However, the WorldCom
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crisis has undoubtedly had an impact on the firm; according to a report
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in the Washington Post, Digex moved its sales staff in Paris and
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Frankfurt to its operation in London to save cash.
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According to the Washington Post, a Digex
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spokesperson said the move was not significant given its business
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strategy. “The clients in that market are still addressed, but it’s
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primarily out of London,” the spokesperson told the Post. “A geographic
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location is not as imperative as other [data center] models.”
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The announcements followed the collapse
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of European carrier and hosting firm KPNQwest earlier in the year, and
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just ahead of an announcement from Cable & Wireless earlier this
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week stating it was preparing to cut 2,000 jobs from its workforce. And
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sandwiched in between the announcements was a filing from European
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communications firm Completel that blamed its operating losses and
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negative cash flow largely on its European Web hosting operations,
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which it has since pared down significantly.
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But cutbacks and closures weren’t the
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only trends evident in Europe’s Web hosting industry this summer.
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Following a cue from North America, where companies have been preaching
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the merits of automation and value added services for the past year and
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a half, several firms announced plans to introduce automated building
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tools in to their service portfolio. One of the heavy hitters that
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unveiled plans were Host Europe, which said it would offer Trellix’s
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Web publishing platform to customers using its 123-reg.co.uk domain
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registration service. “We are seeing significant growth in the number
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of sites being launched in Europe by mainstream small businesses,”
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Trellix CEO Don Bulens said in a release at the time of the
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announcement. “The primary and immediate need of these companies is a
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professional yet easy-to-manage Web site.”
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In a separate announcement, Host Europe
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pointed out that its new publishing services and easy to use server
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administration software helped it achieve organic growth of 50%.
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For some companies, the summer of 2002
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was a season of opportunity, and provided a chance to develop and apply
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a renewed business focus. But for others, summer was simply yet another
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season in what seems to be a never-ending industry slowdown. Regardless
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of where each company stands today, however, Europe’s Web hosting
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market has certainly proven to be just as competitive as North
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America’s – something many companies apparently failed to anticipate
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when they first opened for business.