Prodigy Acquisition Poised to Reap Web Hosting Revenue

Prodigy Communications Corp. Wednesday acquired BizOnThe.Net, a subsidiary of VarTec Telecom Inc.
The move makes Prodigy the second largest publicly-owned small business hosting Internet service provider in the country.

Prodigy (PRGY) will acquire BizOnThe.Net’s more than 80,000 subscribers, 140 employees and the network infrastructure of the Web hosting company for $100 million in Prodigy stock and cash.

David Trachtenberg, Prodigy president and chief operating offices, said the agreement fulfills two strategic goals for Prodigy.

“With this agreement, Prodigy achieves two important strategic goals at. First, Prodigy firmly establishes itself as a leader in the rapidly-growing small-biz marketplace and second, Prodigy will make it even easier for small-biz owners to focus on their business, rather than on their IT needs,” Trachtenberg said.

Trachtenberg added that investors should be pleased with their second major acquisition since going public earlier this year.

“This opportunity delivers on our promise to investors to continue to aggressively increase Prodigy’s subscriber base,” Trachtenberg said.

As a part of the deal, BizOnThe.Net will assume operational management and implementation of the entire Prodigy suite of small business services.

Gary Remy, BizOnThe.Net president, said the demand for e-commerce solutions among the small business marketplace has created a dynamic opportunity for both companies.

“In just 18 months, BizOnThe.Net has achieved enormous success and recognition in the small business marketplace, and we fully expect to continue that upward trajectory,” Remy said. “With Prodigy’s powerful brand name coupled with the best suite of Internet services that every small business needs like access, Website design, e-commerce, we couldn’t be more well-positioned to take advantage of the explosive growth of small business on the Internet.”

Remy will oversee all operations in Houston, under the Prodigy BizOnThe.Net brand name. Prodigy will combine each company’s respective products to offer a comprehensive service offering to the Small Office/Home Office market segment.

According to Forrester Research, the SOHO Web hosting market is growing at an accelerated rate on the Internet. Small business Web hosting services collected over $487 million from clients in 1998, and is projected to top $4.8 billion by the end of 2002, representing a 10-fold increase in Web hosting revenue.