Archive for December, 2007

iWeb You A Merry Christmas — Santa comes to Montreal

Saturday, December 22nd, 2007

iWeb Group Inc. (TSX-V: IWB) just posted its 2007 fiscal results (ended Sept 30th) just in time for the Christmas party.

How did iWeb do?

  • Revenue was $9.8 million, an increase of 71% over 2006.
  • Adjusted EBITDA was $2.8 million, 29% vs. 25% in 2006
  • Gross profit margin was 57%, compared to 54%.
  • Revenue improvement was driven solely by organic sales growth.
  • 80% of revenue from dedicated hosting, shared and colo 10% ea.

What is in Eric Chouinard's (iWeb, President and CEO) Christmas stocking?  Exactly what was at the top of his list, $4.1 million (net proceeds of a recent public offering) to build out the firm's 3rd data center in Montreal, should hold another 850 cabinets.

Above the iWeb water cooler the note stated "Le parti de Noël programme comme planifié."

"The Christmas party is scheduled as planned."

And in passing I also wish all the WHIR folk, the readers and all of your families a merry and safe Christmas - Tom

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Web Hosting Mergers and Acquisitions - November 2007

Monday, December 17th, 2007

In case you missed a few - here are some web hosting and related merger, acquisitions and noteable transactions from around November 2007.

AxisHOST Montague, MI acquired VPS solutions provider, BuyAVPS.

BBS Technologies Houston, TX acquired R1Soft, a data recovery software firm.

Cenicola-Helvin Enterprises Las Vegas, NV acquired Florida based Lpanel.net Corp consisting of Web hosting customers.

DevStart, Orland Park, IL acquired ServerSeek.com, a server company directory.

Eventi Capital Partners Inc., Toronto, ON acquired equity stake in Brian Shepard's Canada Web Hosting.

Fat Jack Hosting Suwanee, GA acquired budget hosting company NWAHosting.

Ben Neuman’s Los Angeles, CA based Globat.com acquired virtually all assets of HostAWay.net.

HostedToday.com Charlotte, NC picked up shared hosting provider TheGreatHostingCompany.com.

Interoute, London, UK acquired Sweden based  hosting and managed services company, pi.se.

Mountains West Exploration, Inc. Downers Grove, IL acquired Secured Digital Storage LLC online backup data storage.

Nettlinx, Limited Union City, NJ (Subsidiary of a firm from India) acquired Host Department, LLC.

Raincity Studios Vancouver, BC picked up the community publishing platform and hosting company, Bryght.

Ultraspeed UK has completed merger with Hostroute.com, hosting some 50,000 websites.

Webair of Los Angeles, CA purchased Montreal, Canada-based web hosting provider Wisol.

Obviously not all inclusive - but from the NCC files. 

========== MORE ABOUT TOM ==========

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Internal Combustion Web Hosting Model

Tuesday, December 11th, 2007

HostedToday recently announced it had acquired TheGreatHostingCompany. I tracked down HostedToday owner Rodney Ringler, or was it the owner of  RoundBerry? Or the person who owns HostChart.com? All the same Mr. Ringler. He is an unabashed self promoter, nothing wrong with that.

Rodney confirmed one of my hosting theories, the internal combustion model. He has several brands, all competing with each other, all about the same price point, all answered by the same customer service staff. Sounds synergistic.

Combined Ringler’s four hosting brands serve about 10,000 accounts, the recent acquisition of TheGreatHosting Company added about 200 accounts. But it was for a friend and it got him a press release.

With internal combustion you spread your bets with several brands, if a potential customer does not like brand "A" maybe they will like brand "B". Same type servers, same data center, same staff but different skins. Many web host firms do this.

As I have told other hosting firms, he should add some high-octane to the mix.  Why have your top price at $24.95 as the RoundBerry shared Corporate… when your new brand “OpiumHost” (I made that up) can have basic corporate “red line” hosting for $49.95 – and expanded shared hosting plans up to $185.00. Many buyers like to pay more, it is obviously better.  Same type servers, same data center, same staff but different skin. Yes much higher margins.

Not only do you make more money, when you go to sell your conglomerate you have pushed up your average rate. Higher average rates will command a higher price and make your firm easier to sell.

========== MORE ABOUT TOM ==========

New Commerce Communications

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Are domain name registrars responsible for intellectual property infringement?

Tuesday, December 11th, 2007

A recent case filed by Dell against a number of domain tasters and their registrars attempts to hold the registrars liable for infringing some of Dell’s intellectual property.  The claims that are relevant to domain name registrars allege that at least 3 registrars created a chain of registrars who took advantage of the ICANN 5 day redemption period to profit off Dell’s trademarks.  Dell alleges that these registrars allowed domain tasters to redeem domain names at one registrar and subsequently register it at an affiliated registrar.  This would preserve the taster’s interest in the domain name, and allow the affiliated registrars to share in any click through revenue created by the registration of the name.

Without going into the technical legal arguments raised by this case, a suit against domain name registrars has serious implications for hosts and other internet infrastructure providers.  Dell’s arguments are very similar to copyright infringement claims made in the early days of the web:  that those who facilitated the infringement of the copyrighted work were liable as third parties since they facilitated the infringement, and profited from it through the fees they collected.  While the facts in Dell’s case are pretty sensational (a chain of registrars profiting off a nuance in ICANN rules), the case shows that transparent attempts to exploit legal loopholes, are often only temporarily successful.  In this case, setting up a chain of (allegedly) related registrars to profit off of a registered trademark merited a swift response from Dell.

So what does this mean for hosts and other Internet infrastructure providers?  The first lesson is that the doctrine of third party liability for intellectual property infringement is alive and well.  This means that you need to remain aware and vigilant about your business activities.  This vigilance is important particularly in the area of trademarks, where, unlike copyrights, there is no “safe harbor” for businesses who are simply links in the chain of bad acts of customers or third parties.  A second lesson relates to Domaining.  While initially a suspect business, domaining has become a legitimate part of the Internet.  Hosts and other Internet infrastructure providers need to be aware that registering domain names involves a different risk assessment than other business efforts.  Because domainers tend to be very creative in their business, and business creativity often requires a higher level of legal analysis, those who provide business services to domainers need to examine whether the processes and procedures they have put into place effectively isolate the risk that these new customers may pose to their business.  

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CompUSA Woke Me Up - I thought this was over.

Saturday, December 8th, 2007

In a recent blog about Best Buy and Circuit City I unfortunately added CompUSA. Waking up I find CompUSA is going out of business…rather than making this fodder for a blog sequence rivaling War and Peace…

From these possible headlines - Imagine your own ephemeral blog…

-103 CompUSA Stores Close - Chuck expands production sites nationwide.

- CompUSA, controlled by Mexican Carlos Slim Helu's Grupo Carso - Sites key in immigration reform.

- Let's make a deal - haggle at CompUSA before Christmas.(Lame headline but true.)

- TECHPRO - no competition to Geek Squad and Firedog

- Warren - no new polo shirts this Christmas at CompUSA 

and…last but not least… 

- Breakage Key to Success, "Honey, did you send in that CompUSA rebate yet?" 

========== MORE ABOUT TOM ==========

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Limelight Networks and NaviSite Made the Team

Thursday, December 6th, 2007

“Hey Mom I made the team!” – I could almost hear Jeff Lunsford and Art Becker call home when they found out they made the NASDAQ team.

The team is the new NASDAQ Internet Index (Launched November 27), consists of 94 firms including heavyweights such as InfoSpace, TheStreet.com, SAVVIS and, oh did I fail to  mention Google and Yahoo. Of course the team includes Lunsford’s Limelight (LLNW) and Becker’s NaviSite (NAVI). Playing with the big boys.

From a WHIR perspective the Index is a bit heavy with “marketing” firms. But looking at the landscape there are really few “generally” pure public hosting firms.

So team (this is my broker side talking) we need more acquisitions! Build larger firms and make more money. I have been preaching the message of leverage for years. Public firms, liquidity, bank debt. Never pay the tax man, let his money work for you.

So while I expect some comment about NaviSite and a few stumblings, they did make the team.

========== MORE ABOUT TOM ==========

New Commerce Communications

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Interview Notes with Dave Roberts of Vyatta

Tuesday, December 4th, 2007

I recently had the opportunity (actually, it was a couple of opportunities) to speak to Dave Roberts, vice president of strategy and marketing at Vyatta about the company’s open-source networking platform. It’s an interesting product, and as yet a bit of a departure for the hosting business in terms of the way these services are deployed

As usual, many of the key elements of the conversation made it into the article we posted on the site, but much more was said about the Vyatta community (it is open source software, after all) that helps to further fill out the picture of Vyatta the product. It seemed, as it often does, like excellent fodder for the blog

First, a lengthier explanation of the model Vyatta uses to package its open source product (Red Hat versus MySQL)

“Essentially, there are a variety of open source business models; what we typically call here, just for convenient shorthand, the MySQL model and the Red Hat model. In the MySQL model, a company writes all its code and then releases it as open source. So if you go to the MySQL website, you’re basically getting code that’s written 100 percent by MySQL with contributions from the outside world. If you go to Red Hat, you’re essentially getting a distribution that is pulling components from all over. Red Hat incorporates MySQL, a Linux kernel, Apache, Perl and all these other components and pulls them all together in a distribution and gives you some hooks to be able to manage it. We are more like the Red Hat model than the MySQL model; we are pulling together components from other places, but we’re also doing a lot of our own work to integrate those components.”

This difference translates into a difference in the way the user interacts with the company’s support, and with the product itself:

“Our fundamental belief is that Red Hat’s community is different than MySQL’s community because of how things are done. So if you discover a bug in MySQL, you’re going to send it to MySQL, not to Red Hat, even though Red Hat incorporates MySQL. What you would submit to Red Hat are patches to Red Hat’s specific stuff.

To a certain extent, our community is the sum total of all the communities of all the projects that we incorporate.”

Finally, Roberts offered an explanation of who he envisions using the product, and how he sees that relationship contributing to the development of the Vyatta platform, both within the user’s system and at the top level:

“We’re designing for people who want to deal with our package exclusively, but we make it fully available for people that want to go deeper. Our philosophy is to present something that is very highly integrated and wrapped up, and is Vyatta, as opposed to just a collection of packages, even though we’re not ashamed of the packages we use and we don’t try to hide that. We’ll tell you flat out what’s in there

One of the things we see as an advantage is its based on Linux. So even though we’re trying to provide a nice experience that is one of a traditional proprietary appliance in terms of being highly integrated - the fact that you can jump down to the Linux level, which we don’t prevent you from doing at all, is an advantage to people. And you can extend the system, because it’s based on Linux, with other Linux packages.

Essentially we’re compatible with a Debian package format, and so you can add Debian packages to a Vyatta system. For instance, we don’t ship it this way, but if you wanted to run MySQL on your router, you could. If you wanted to extend it with another package we don’t yet provide, you could. You’ll lose some integration when you do that. You’re going to have to administer MySQL at the Linux level. You’re not going to do that in the nice GUIs and shells that we provide.

One of the goals that we have over time is to allow the community to provide that level of integration for different packages that they find beneficial. And that’s something that we see to a certain extent in the Red Hat community.

If I had to discuss the differences between the MySQL community and the Red Hat community - the MySql community is more of a developer community that is working on MySQL itself. The Red Hat community is more of an integrator community. So they’re taking other packages that they find interesting for which red hat doesn’t have any official distribution and basically making them red hat compatible.”

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