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Adam Eisner, theWHIR.com
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October 26, 2001 — (WEB HOST INDUSTRY REVIEW) — Now that earnings season is officially upon us again, markets are relying largely on what companies are saying about their performances as an indication of where markets and the overall economy are headed. The Nasdaq had a fairly strong week based on a mix of varied results, which included reports from a number of major players in the Web hosting industry.
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In the U.S., managed hosting firm Digex beat analyst expectations by posting a smaller-than-expected loss, which sent shares climbing, although Legg-Mason still downgraded the company from “strong buy” to “market perform”.
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Communications firm Level 3 also posted a smaller loss than many were anticipating this week, and also announced it would cut 750 jobs of its 4,500 person global workforce. Investors reacted warmly to the news, sending shares from about $3 mark to $3.50. Level 3 was trading at $3.38 Friday morning.
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Keeping with communications and fiber for a moment, SAVVIS Communications said Friday its consolidated revenue had increased 11% to $58.4 million, compared with $52.8 million in the third quarter of 2000. Investors initially thought this was good news, sending shares up about ten percent.
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And finally, north of the border, Canadian telco TELUS reported its earnings this week. The company, which trades on the Toronto Stock Exchange, reported a large increase in both financing and revenues. Investors seemed to listen only to the good news, however, and sent the stock rising more than two dollars this week. TELUS was trading at $23.62 Friday morning.
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Aside from earnings, there was plenty of other news out of the Web hosting and communications sector this week.
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Network provider Broadwing Communications said Friday it had struck a multi-year agreement with Allegiance Telecom, Inc. to provide network services to eight of the carrier’s metropolitan markets.
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“Broadwing’s all-optical switched network has the power, bandwidth capacity and speed to enable us to continue growing our business by expanding our products and services,” said Dan Yost, Allegiance President and CEO.
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Shares in both companies picked up about 25 cents each on the news. Broadwing trades on the NYSE while Allegiance trades on the Nasdaq.
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On Thursday, Mark Andreesen’s LoudCloud, a provider or managed services, introduced a disaster recovery program which allows customers to quickly recover their Web sites from catastrophes, ensuring availability to end users.
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Shares in LoudCloud had a fairly good week, with the company climbing above the two-dollar mark to about $2.36.
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Hosting firm Interliant also introduced an additional value-added service for customers Thursday, announcing the availability of a Web tracking and reporting service for hosted Domino customers. This optional browser-based service enables Interliant customers to track the unique habits of individual Web site visitors and use this data to improve the overall quality and performance of their sites.
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On Tuesday, European Web hosting firm Worldport Communications said it was awarded three now managed hosting contracts. Worldport will now provide managed services for ASP firm Telecomputing, technology developers e-Spatial Solutions and The McLaren Group, a management consultancy provider.
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And Monday, Global TeleSystems, Inc., parent company of European hosting firm Ebone, said it had signed a definitive share purchase agreement with KPNQwest.
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Under agreement, KPNQwest will acquire the struggling GTS, which includes Ebone, and GTS’s Central European operating companies, which provide voice and data communications in Central Europe.
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KPNQwest said it will issue about EUR210 million of new senior convertible bonds and assume bank debt and capital lease obligations to pay for the transaction.
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“GTS and KPNQwest make a formidable combination. We believe that this new company can lead the data revolution in Europe,” said Robert Amman, Chairman and Chief Executive Officer of GTS. “The many valuable facets of GTS – its assets, its customers, and most significantly, its talented people – will be a great addition to KPNQwest. We expect this new combined company to thrive.”
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GTS currently trades on the OTC Bulletin Board. Shares in KPNQwest picked up about $1.50 on the week, and were trading at $7.14 heading in to Friday afternoon.
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Looking ahead to next week, a number of major companies will announce their earnings, including Genuity and Interliant. It will be interesting to see how some of the industry’s big players are doing in the wake of the continued downturn and the demise of competitors like Exodus.
