Tony and Thread -Article on Intel vs. Exodus in the web hosting business
fnews.yahoo.com
Sep 29, 1999
Hostess With the Mostest: Exodus vs. Intel
By Spencer E. Ante
Staff Reporter
SANTA CLARA, Calif. -- For Exodus (Nasdaq:EXDS - news) , it's getting harder to be the big shot in the Web-hosting playground.
On Tuesday, Intel (Nasdaq:INTC - news) officially launched its Web hosting business. Back in April, when Intel first announced it was entering the data center business, many observers said the chip giant was far away from competing against Exodus. But as the venture takes shape, it's getting clearer that Intel will be butting heads with Exodus, an encounter that no company looks forward to.
"It's a strong, significant move," says IDC research manager Steve Murray. "They're going to be serious players."
The new Intel business unit, to be called Intel Online Services, includes a 85,000 square foot data center in Santa Clara, Calif., that has been in operation since Sept. 1, and a testing facility in Folsom, Calif.
With the facilities, Intel wants to manage e-commerce Web servers and applications. It's part of Intel's strategy to be the "building block supplier of the Internet economy," according to Intel executives. The market for data and application hosting services will reach as high as $20 billion by 2003, they say.
Intel is far from finished: The company plans to spend more than $1 billion to open 12 data centers by the end of 2000, including ones in Japan and England. Initial customers include the e-Citi unit of Citigroup (NYSE:C - news) , Excite@Home (Nasdaq:ATHM - news) Shopping Service, and NEC (Nasdaq:NIPNY - news) ADR. Executives say they expect thousands of customers in the coming years.
"We're intending to go after this in a big way," says Michael Aymar, vice president and general manager of Intel Online Services.
For months, the two companies seemed unlikely to collide. Exodus has been targeting the high end of the Web-hosting market, whereas Intel said in April that it was going after companies less experienced with the Internet.
Since then, Exodus started swimming downstream by selling preconfigured hardware that enables newbie companies to get up and running quickly. Intel, meanwhile, started its way upstream. "We will be targeting all sizes of customers," says Aymar, a 23-year Intel veteran. Indeed, Aymar says Intel is now better equipped to handle the cutting edge companies better than small businesses.
And yet Exodus downplays the Intel threat. Speaking to a packed room at the Banc of America Investment Conference, Exodus CEO Ellen Hancock said that it was not competing directly against Intel.
Exodus is facing other formidable competitors. When AT&T (NYSE:T - news) announced plans on Sept. 14 to build up to 26 new data centers and double the size of its existing centers, Exodus shares dropped nearly 7% in one day. At the BofA conference, AT&T Internet Services President Kathleen Earley reiterated Ma Bell's intention to aggressively go after the Web hosting market.
One Net-savvy company Intel snagged is Quokka Sports (Nasdaq:QKKA - news) . Quokka CEO Alan Ramadan says his company considered five other hosters before deciding to choose Intel for its track record and commitment to developing platforms for the digital distribution media.
And why trust Intel -- a company with little to no experience in developing Web-based applications? "They have delivered against everything they've said over the last six months," says Ramadan. "Our technology folks have confidence in their ability to execute."
Of course, that Intel is an investor in Quokka and has worked with the giant for several years developing content optimized by Intel chips helped build its confidence level in Intel Online Services. Currently, Quokka is using Frontier (NYSE:FRO - news) GlobalCenter for its hosting needs, but Ramadan says it will shift its servers over to Intel during the next six months.
Exodus and its competitors have an edge with a sizeable lead in the hosting market. Exodus has acquired more than 1,300 customers and plans to end this year with 22 data centers across the globe. And Intel still has to overcome its reputation that it is not a service company whereas Exodus claims 30% of its revenue by year's end will come from managed hosting services.
"Intel has a great name but what's their name in?" asks Matt Ankrum, assistant portfolio manager with Janus Capital, which is long Exodus. "It's in manufacturing."
Some analysts also argue that Intel will be hobbled by a penchant for pushing Intel-based hardware. Intel's Aymar, however, stresses that Intel will support whatever platform its customers want, no matter how much it hurts to have Sun Microsystems (Nasdaq:SUNW - news) computers inside an Intel facility.
"It does cause a certain amount of unhappiness," says Aymar, referring to the Sun hardware. "But it does provide motivation to the engineering division."
Last but not least, Intel must prove that it can master the art of network services, the most critical service that a hoster provides. And on this front it appears to be weak. For the launch, Intel only announced a partnership with one network service company, MCI WorldCom's (Nasdaq:WCOM - news) UUNET unit. When asked how many peering relationships it will acquire through this relationship, company executives declined to offer a number. By contrast, Exodus claims peering relationships with more than 200 ISPs.
"I think you need two network providers," joked IDC's Murray. "I'm sure it's on their list but I don't think [Intel] is going to be the 800-pound gorilla that they are in the chip space." |
