Web Host Acquisitions Afire in 2005

• By theWHIR.com , December 26, 2005

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By Justin Lee, theWHIR.com

December 26, 2005 -- (WEB HOST INDUSTRY REVIEW) -- The Web host industry was inundated with a vast variety of mergers throughout 2005, ranging from the earth-shattering acquisitions of the market's largest players down to the gentle plucking of smaller, less experienced hosts.

This summer, in particular, saw two of the industry's largest mergers, starting with Canadian Web hosting provider Peer 1 Network (peer1.net) acquiring the dedicated server assets of Interland (interland.com) for $14 million.

Interland gradually narrowed its focus this year, selling its Hostcentric shared hosting assets to Caird Corporation (cairdcorp.com) for $3.4 million in May. The company had owned and operated Hostcentric since acquiring it in June 2003. The acquisition included all shared hosting accounts Interland acquired from Hostcentric and all new customers signed up under the brand since the acquisition.

Internet exchange and network service provider Terremark (terremark.com) acquired the outstanding stock of European managed dedicated hosting provider, Dedigate, for 1.6 million shares of Terremark common stock. The acquisition expands on Terremark's market reach, product offerings and presence in the enterprise space, while complementing its international growth plans.

There were several very large mergers overseas in the Europe market. TeleCity (telecity.com) purchased long-time rival Redbus Interhouse (interhouse.net) in Novermber in an all-stock transaction. The deal united two very similarly constructed companies, both in their capabilities and focus, creating a formidable new player in the market.

In August, Cable & Wireless (cw.com) acquired application and managed hosting provider Energis for a lofty $1.08 billion price, which included four data center facilities that total 213,000 square feet in space.

While there was no shortage of large-scale acquisition, 2005 saw larger Web hosts buy up many smaller hosting companies as well.

Boston-based Shared hosting provider Endurance International Group (enduranceinternational.com) purchased Web host FatCow (fatcow.com) in April for an undisclosed amount.

In August, New Jersey-based uplinkearth (uplinkearth.com) acquired Canadian Web host Nevidia Internet Solutions (nevidia.com). Both companies specialize in Windows platform hosting for small businesses, and focus on customer service. Nevidia had previously moved its servers to uplinkearth's data center to ensure that its customers enjoyed a quality hosting environment.

A previously planned merger between Web hosting and colocation provider Hosted Solutions (hostedsolutions.com) and managed host DataPipe (datapipe.com) was called off in November. Hosted Solutions strong growth in the second and third quarters of the year played an integral factor in the company's decision to terminate the merger.

The North Carolina-based Hosted Solutions is reported to have had annual sales of $6.7 million last year, while DataPipe generates an average of $40 to $50 million in yearly revenue.

Private equity capital firm Vector Capital acquired domain registrar and Web host Register.com (register.com) in August for $7.81 per share in cash, totaling approximately $200 million. The domain registrar had previously rejected an acquisition offer from RCM Acquisition Co in July, who offered $7.10 per share in cash.

And, after unloading some of its own hosting assets, Interland (interland.com) acquired Web host Web.com in December for $4.4 million in cash, restricted stock and assumed liabilities. The deal includes 9,000 hosting accounts, ownership of the Web.com domain and an accredited domain registrar. Additionally, it is expected to add $900,000 to Interland's annual hosting revenues.

The year also witnessed a number of mergers among companies that deal directly with Web hosts.

In March, Internet giant Google (google.com) acquired San Diego based Web analytics software developer Urchin Software Corporation (urchin.com) for an undisclosed sum.

Also in March, Akamai Technologies (akamai.com) bought rival Speedera Networks (speedera.com), creating one of the industry's largest providers of content delivery network services. The deal would widen Akamai's overall portfolio of services, as well as bring in Speedera's client base, which includes HP, Microsoft, Doubleclick, Comcast and Verizon.

Private equity group Stoddard Hill Capital (stoddardhillcapital.com) purchased INET Interactive (inetinteractive.com) in November for an undisclosed amount. INET Interactive owns technology properties focusing on Web hosting, Web development and computer hardware sectors, including the popular industry forum Webhostingtalk.com (webhostingtalk.com).

While acquisitions are never a new development in Web hosting, they are often among its most influential movements. And in 2005, the sale of several key hosting assets helped to reshape the hosting landscape and reposition Interland, once one of Web hosting's biggest companies.

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