C&W Users Relieved by Deal to Sell U.S. Unit

Turnaround firm agrees to buy Web hosting operations

Cable & Wireless PLC last week said it has found a buyer for its U.S. Web hosting operations, giving a sense of relief to some corporate users who have stuck with C&W America since the unit was put up for sale in June.

The agreement to sell C&W America to turnaround investment firm Gores Technology Group LLC "seems to bring some uncertainty to an end," said Ron Pellowe, director of systems and networks at EquipNet Direct Inc. in Braintree, Mass. "It puts a much stronger financial backer behind them."

Pellowe said EquipNet, which runs an online marketplace for surplus industrial equipment, considered switching to a new hosting provider when London-based C&W made big cutbacks in the U.S. late last year and announced its pullout plans . But EquipNet decided to stay the course with C&W America.

"We felt the data centers were fairly stable, even though the company was having changes," Pellowe said. He added, though, that he needs to hear promises from Gores officials that they won't close any more of C&W America's hosting facilities.

The Reston, Va.-based U.S. unit has shut down eight data centers this year, leaving 15 still operating. A C&W America spokesman said no additional closings are planned but added that nothing will be ruled out once Gores becomes the owner. In the meantime, C&W America will take other cost-cutting actions, including a network consolidation and renegotiations of contracts.

The sale to Los Angeles-based Gores is expected to be completed by February. Gores will pay up to $125 million for C&W America, depending on future business performance. By comparison, C&W paid $575 million and assumed $180 million worth of liabilities when it bought the U.S. data centers and some overseas facilities from Exodus Communications Inc. in early 2002.

Steve Wigginton, vice president of marketing, operations and development at Neoforma Inc. in San Jose, said he hasn't had any problems with C&W America's hosting services. "We're certainly happy to see what looks like a favorable resolution," said Wigginton, whose company develops supply chain systems and online marketplaces for hospitals and suppliers of medical products.

Rick Thimble, IT manager for the U.S. and Europe at plastic parts maker Moldflow Corp. in Wayland, Mass., said he also is happy with C&W America's performance and hopes to maintain his relationship with the hosting provider.

But Sean Armstrong, senior Internet manager at Network Intelligence Corp. in Walpole, Mass., said his company began shopping for a new hosting vendor late last year and recently signed a contract with AT&T Corp. "We were sick of the uncertainty," he said.

BUYOUT DETAILS

C&W America

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Filed for Chapter 11 bankruptcy protection to help facilitate the deal with Gores.
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Said C&W PLC will provide up to $100 million in financing to help fund operations until the sale is completed.
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Has hired two consultants to serve as its CEO and CFO until Gores takes control.

Copyright © 2003 IDG Communications, Inc.

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