RealTime IT News

PSINet Spins Off Consumer Business

PSINet Inc. Tuesday announced plans to spin off its freshly hatched consumer Web service division into a wholly-owned subsidiary by April 1.

Dubbed Inter.net Ltd. but pronounced "Interdotnet," the PSINet (PSIX) subsidiary plans to eventually provide its 550,000 users in 27 countries with regional Internet business solutions.

PSINet will invest $50 million in working capital for its Inter.net venture. The global carrier is reviewing additional funding opportunities from outside sources before its anticipated initial public offering within the year.

William L. Schrader, PSINet chairman and chief executive officer, said it is just the start of a new generation of global consumer portal Internet companies for PSINet.

"With the support of our global PSINet network and hosting centers, Inter.net will provide global, regional and local portals and content tailored to the needs of the emerging consumer marketplace for communications and e-commerce around the world," Schrader said.

"By consolidating consumer customers into Inter.net, we reaffirm and sharpen PSINet's corporate commitment to the Internet Super Carrier strategy and the long-standing relationships with our strategically important wholesale ISPs customers," Schrader added. "By spinning off Inter.net Ltd. in this way, we anticipate being able to better focus on unlocking the value in both the corporate and consumer businesses."

Inter.net will begin operations with PSINet's existing non-exclusive agreements in place to provide global network access and transit, web hosting, and initial administrative support. It currently supports over 500 ISPs whose customers constitute more than 1.25 million consumer users worldwide.

PSINet named Kurt Baumann chief executive and David Browning president of Inter.net. Baumann and Browning have been working in the consumer Internet arena for the past four years as investors, board members and business advisors to numerous consumer Internet startups.

Baumann said building a provider superstructure like Inter.net has been a dream of his since the early 90's.

"Inter.net is the most important development in consumer Internet history, since this is the first truly worldwide consumer Internet firm with customers, portals, and e-commerce operations in 27+ countries," Baumann said.

"In addition to providing established services to its multinational markets, Inter.net plans to secure agreements with major regional content providers," continued Baumann. "This will allow tailored consumer oriented e-commerce content to be provided on a market-by-market basis in the appropriate language."

Baumann has also been charged with managing PSINet's global Tier 1 interconnection relationships with ISPs. The peering arrangements underlie the Inter.net network to provide industrial strength services worldwide.

Baumann said PSINet's last year's acquisition of Transaction Network Services, Inc. would eventually provide 70 percent of the U.S. e-commerce credit card transactions.

Last week PSINet acquired Metamor Worldwide Inc. (MMWW) and a controlling interest in application service provider Xpedior Inc.Xpedior Inc. (XPDR). The deals facilitated Inter.net's ability to provide global e-commerce Web solutions for companies with legacy programming problems and declare its independence from PSINet.