Intel and Loudcloud plan to quit Web hosting business

Intel Corp. last week announced plans to scrap its 3-year-old Web hosting business, in a continuing a series of consolidation moves by technology vendors that tried to compete in that market.

In fact, Intel wasn’t the only company to say last week that it’s bowing out of hosting. Loudcloud Inc. in Sunnyvale, Calif., disclosed a deal to sell its hosting operations to Electronic Data Systems Corp. in Plano, Texas, in order to recast itself as purely a software vendor.

Stephen Lane, an analyst at Aberdeen Group Inc. in Boston, said the rush by vendors to get into the hosting market left the field overpopulated when user companies tightened their IT budgets. “When you’ve got lots of suppliers chasing business, there’s going to be consolidation,” he said.

Intel launched its Intel Online Services (IOS) hosting unit in 1999 after spending US$150 million to build a facility that housed 10,000 servers, three 1.5-megawatt generators and a 5,000-gallon diesel tank to fuel the generators. The company planned to open 12 similar data centers around the world.

But Intel said it will stop signing new hosting contracts and start working with its existing customers to find new hosting firms for them. The company added that IOS will continue to support users until next June to give them time to make the transition.

IOS’s services, which include management of Web sites and servers, are used by customers such as Sony Corp., the U.S. Army and American Stock Exchange Inc.

Lynn Teresky, a spokeswoman at the New York-based American Stock Exchange, said its Internet operations shouldn’t be affected by Intel’s planned withdrawal. Teresky said the exchange will make “other arrangements” before Intel’s support ends, although she couldn’t say whether it will hire another hosting company or move the services in-house.

Christine Chartier, an Intel spokeswoman, said the decision to shut down IOS is part of a move by the company to refocus on its microprocessor business.

“The bottom line was that future growth and financial projections did not meet Intel’s requirements,” she said.

Vance is a reporter for the IDG News Service.

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