Interliant Sheds, Interland Grows

Continuing with its goal to capture the small- to medium-enterprise (SME)
Web hosting market, Interland, Inc., officials announced its plan to buy up
some of competitor Interliant, Inc’s customers Monday.

The move suits both revenue-challenged companies as executives on both
sides of the bargain look for ways to streamline their operations to core
competencies and gain market share in their niche.

Officials were not available for comment on the cost of the customer
acquisition.

Bruce Graham, Interliant president and chief executive officer, said the
move won’t disrupt service to any of his current customer’s Web hosting
accounts.

“We will work closely with Interland to provide a seamless transition for
our retail Web hosting customers,” Graham said. “During the transition
period, the servers will remain in Interliant’s
Atlanta data center, while Interland migrates the customers to its data
center, also located in Atlanta. The process is expected to take
approximately two to three months.”

Interland, bought
out by PC manufacturer Micron in March, continues its plans to dominate
the SME market despite financial hiccups along the way.

The company, the combination of Interland and Micron’s former Web hosting
division, is still working on ways to get its operations profitable. It’s
fourth quarter report, released Oct. 9, shows the company is in the middle
of a shakedown, posting a net loss of $147 million, including a $5 million
write off of one of its investments.

According to Joel J. Kocher, Interland chairman and chief executive
officer, profitability can be reached through acquisition.

“Interland is seizing this opportunity to leverage our strong cash position
by strategically acquiring Web hosting accounts that will allow us to more
rapidly achieve the scale needed to accelerate our drive to cash flow
profitability,” he said. “By adding new customers and revenue without
acquiring additional assets, we are significantly improving our operating
efficiencies. This deal should be immediately accretive to gross margins.”

Interliant is also in the midst of a revenue shakedown, as it sheds the
unprofitable portions of its operations to fend off insolvency. Last
week, as it restructured $126 million of its debt, officials narrowed down
the companies core competencies to four areas: security, messaging,
branding solutions and managed hosting.

“The sale of our retail hosting business – one of our non-core business
areas — is another step in the execution of our restructuring strategy,”
Graham said. “Interliant will continue to be a major player in the Web
hosting sector through our Branded Solutions offerings.”