Concentric Network Corp., a leading provider of network services, announced today that it has agreed to buy Web hosting company 9 Net Avenue, Inc. for $54 million (US$) in stock and cash.
Company officials feel that the acquisition will beef up Concentric’s e-commerce capabilities and also “significantly increase” its customer base. Once the deal is consummated, Concentric expects to become the second-largest Web hosting company — with more than 188,000 registered domains and more than 104,000 hosted sites.
“Our acquisition of 9 Net Avenue reinforces our position as the leading provider of e-business solutions for small-to-medium sized companies,” said Henry R. Nothhaft, chairman and chief executive of Concentric Network.
Improve Competitive Position
By acquiring 9 Net Avenue, industry observers feel that Concentric will be in a better position to compete with such heavyweights as America Online and MCI WorldCom in the e-commerce arena.
New Jersey-based 9 Net Avenue’s portfolio includes domain parking, UNIX and NT-based Web hosting, e-commerce, dedicated hosting and co-location service. Additionally, 9 Net Avenue has a data center facility located in Secaucus, New Jersey, with connections to top Internet companies. Concentric will also gain key sales, engineering and marketing personnel as a result of the acquisition.
“In addition to gaining East Coast data center capacity and greater critical mass,” Nothhaft said, “this deal augments our organic growth.”
Virtual Private Networks
Analysts also point out that by acquiring 9 Net Avenue’s infrastructure, Concentric will be able to more aggressively market Virtual Private Networks. These increasingly popular networks give companies with remote offices an inexpensive way to offer secure telecommuting options for its workers.
According to a recent survey by Forrester Research, Inc., 92 percent of companies polled were currently using or planning to use VPNs within two years. If this trend continues, some analysts predict that Concentric’s purchase of 9 Net Avenue will prove to be a smart move.
However, these same analysts also point out that if such a boom occurs, Concentric’s major competitors will be expected to focus more of their attention on the small-to-medium business market.
Founded in 1991, San Jose, California-based Concentric Network (CNCX) offers a full portfolio of Internet and networking services, including Web hosting, local Internet dial-up, remote access and videoconferencing.
Its customers include corporations such as Microsoft’s WebTV Networks — which makes up 33 percent of its sales — AT&T and 3Com. Rock star David Bowie’s BowieNet Internet service uses Concentric’s technology.
Concentric also has entered into a joint venture with Telecom Italia — which owns 11 percent of Concentric through a subsidiary — to offer MondoNet global Internet network.
In its fiscal year ending December 1998, Concentric lost $82.1 million on earnings of $82.8 million. The company employs about 569 workers.
Shares of Concentric fell 1 5/16 to 19 on Friday.