Intel bows out of Web hosting business

Less than three years after entering the Web hosting market, Intel Corp. bid the space goodbye last month.

Santa Clara, Calif.,-based Intel launched its Intel Online Services (IOS) hosting unit in 1999 after spending US$150 million to build facilities that housed 10,000 servers and three 1.5-megawatt generators. It will now take a US$100 million charge in the second quarter to exit the market. During the same time frame, Intel said that along with managing and providing the actual networks and facilities, they would also oversee the purchasing, deployment and integration of all the necessary software and hardware needed to run the applications.

The microprocessor and chipmaker said that no new clients will be added, and that it will work with its customers to find new hosting firms for them.

The firm had no Canadian customers. New York-based Sony Corp., however, was a minor user of Intel’s hosting services; a spokesperson for the firm said that no decisions have been made as to who may assume the contract.

“They weren’t even one of our primary hosting services [providers],” said Greg Dvorken, spokesperson for Sony in Park Ridge, N.J. He added that Sony has two or three major vendors who do handle their Web hosting and that Intel’s departure probably wouldn’t have a major impact.

Doug Cooper, Canada country manager for Intel, blamed the demise on the overall economic picture surrounding the Web hosting market.

“While [IOS] has been successful in attracting new customers, current market trends and financial projections for the hosting services industry led us to our decision to wind down Intel’s Web hosting business,” said

While not a major player in the market, Intel has, in the past several years, looked to shake its image as a chip-making company and to broaden its IT reach. However, it has not had much success cracking a market in which it is difficult to find profitability.

“They had some good intentions in attacking the market but they made some critical errors. A lot of it was messaging, they really didn’t pick a cohesive strategy of how to attack.…One thing they really lacked was focus,” said Ted Chamberlin, networking analyst for Gartner Data Quest in Stamford, Conn. He gave Intel full marks, however, for agreeing to stick it out with its clients until next June when services will completely cease.

Framingham, Mass.-based analyst Melanie Posey from International Data Corp. said it is difficult to surmise how profitable Intel was in the space because they never released any financials on revenues, but claimed to have several hundred customers. The list does include such notables as eBay, the U.S. Army and the American Stock Exchange.

“Everybody was wondering what the hell [Intel] was doing when they got into Web hosting in the first place. Intel getting out of the market wouldn’t have the same impact of IBM getting out of the Web hosting market. It doesn’t make the market outlook any worse than before,” Posey said.

Intel had started to make inroads in the sense that they began appearing on RFP’s (Request for Proposal) short lists in bid situations, as the company seemed to be a safe choice.

The firm was not alone in its departure, as Loudcloud Inc. recently announced it was selling its hosting operations to Electronic Data Systems Corp., and earlier this year Exodus Communications Inc. also waved goodbye to its Web hosting empire.

– With files from IDG News Service

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