Summer a Season of Change for Europe’s Web Hosts

Summer a Season of Change for Europe’s Web Hosts

Adam Eisner,

September 20, 2002 - For most businesses, summer is a time to slow down, take vacations and gear up for the fiscal New Year.

But for many European hosting firms, the summer was anything but slow. Several European Web hosts used what is traditionally viewed upon as a season for downtime (no pun intended) to revamp their strategies or make structural changes to company operations.

One firm that attempted to shift its focus this summer was London-based Netscalibur, which made headlines last year when it went on a spending that saw the firm purchase six companies in eight months. One of its last well-publicized purchases was German Web hosting firm Securitas Internet Systems, which Netscalibur purchased for £4 million in April 2001.

By September of 2002, however, the company had decided to exit the German market entirely in order to focus on higher-end clients centered in the UK and Italy. As a result, Netscalibur sold its German operations to UK ISP Claranet for an undisclosed sum earlier this month.

\\\"[Netscalibur’s] German operation accounts for a small share of overall revenues and will enable Netscalibur to free up resources to accelerate the development of its growing suite of IP services,\\\" a release from Claranet said. But while Netscalibur is shifting focus, it is not necessarily sending out a signal of distress. The company became EBITDA-positive in the second quarter of 2002, and says its on course to achieve growth of nearly 20% in IP revenues this year, boosted by account wins like a six-figure hosting deal with Lycos and a €2.5m contract with Deutsche Telekom in Italy.

One company that has been forced to change its strategy in Europe because of more pressing issues is Digex, a complex hosting firm based in Maryland. The company significantly pared its European hosting operations late last month following a round of layoffs in mid-August. Digex reportedly pulled out of facilities it leased from bankrupt telecommunications firm WorldCom, its owner, in an effort to cut costs.

Digex had previously said it would not be affected by the accounting scandal surrounding WorldCom, which owns the majority of the company and holds a 94 percent voting stake in the company. In fact, at the time of WorldCom’s bankruptcy filing in mid-July, Digex pointed out that it was a separate public company that was not included in WorldCom’s voluntary petitions for reorganization. The company has also reportedly gone out of its way in the past to point out that it is not a WorldCom subsidiary. However, the WorldCom crisis has undoubtedly had an impact on the firm; according to a report in the Washington Post, Digex moved its sales staff in Paris and Frankfurt to its operation in London to save cash.

According to the Washington Post, a Digex spokesperson said the move was not significant given its business strategy. \\\"The clients in that market are still addressed, but it\\\'s primarily out of London,\\\" the spokesperson told the Post. \\\"A geographic location is not as imperative as other [data center] models.\\\"

The announcements followed the collapse of European carrier and hosting firm KPNQwest earlier in the year, and just ahead of an announcement from Cable & Wireless earlier this week stating it was preparing to cut 2,000 jobs from its workforce. And sandwiched in between the announcements was a filing from European communications firm Completel that blamed its operating losses and negative cash flow largely on its European Web hosting operations, which it has since pared down significantly.

But cutbacks and closures weren’t the only trends evident in Europe’s Web hosting industry this summer. Following a cue from North America, where companies have been preaching the merits of automation and value added services for the past year and a half, several firms announced plans to introduce automated building tools in to their service portfolio. One of the heavy hitters that unveiled plans were Host Europe, which said it would offer Trellix’s Web publishing platform to customers using its domain registration service. \\\"We are seeing significant growth in the number of sites being launched in Europe by mainstream small businesses,\\\" Trellix CEO Don Bulens said in a release at the time of the announcement. \\\"The primary and immediate need of these companies is a professional yet easy-to-manage Web site.\\\"

In a separate announcement, Host Europe pointed out that its new publishing services and easy to use server administration software helped it achieve organic growth of 50%.

For some companies, the summer of 2002 was a season of opportunity, and provided a chance to develop and apply a renewed business focus. But for others, summer was simply yet another season in what seems to be a never-ending industry slowdown. Regardless of where each company stands today, however, Europe’s Web hosting market has certainly proven to be just as competitive as North America’s – something many companies apparently failed to anticipate when they first opened for business.

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