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To: AlienTech who wrote (41922)	11/19/2001 3:39:48 PM
From: AlienTech	Respond to of 43080

WorldCom takes Digex international By Emily Bourne, Total Telecom 12 November 2001 WorldCom is taking its managed hosting arm Digex to the international market, with four centers recently opened in Europe and Asia, and more planned. "I don't think we would have survived as an independent company," Thomas Davidsson, senior vice president of Europe at Digex, told Total Telecom. The WorldCom connection has been a "tremendous boost," said Davidsson, citing "the customer pulling power that they have, and the stability they can show." If the WorldCom deal hadn't gone ahead, he added, "someone else would probably have picked us up." One of Digex's leading suitors was Web hosting giant Exodus, which filed for Chapter 11 in September. Davidsson acknowledged the future could have been different if that deal had gone through (Exodus reportedly offered US$8 billion to acquire Digex in 2000). Maryland-based Digex began its international expansion last year with the launch of its London center. This summer it opened further facilities in France, Germany and Tokyo. There is a need for a few more in Europe and Asia, said Davidsson, though the final go-ahead has not been signed. Still, the European centers are far from 50% filled, and the colocation market is currently at a low point, with too much unused space and many players in financial difficulties. Pan-European colo company CityReach went into administration in August after building eight centers. Davidsson said Digex plays in a different market, that of managed services rather than colocation. CityReach suffered because colo "went to a commodity market fairly fast," he said. A managed service, in his opinion, is where the whole product, including hardware, software and applications support, is provided as a service and owned by the hosting company. Whereas in the colocation business, the customer owns the equipment and services are provided only as a value add. Some companies are wary of relinquishing control of their IT systems, said Davidsson, but increasingly companies are willing to outsource. "Our biggest competitor is still internal," he said. Digex's customers are typically large corporates and about 50% of its sales leads come from WorldCom channels. Normally Digex will run their e-commerce suite, linking it in to back end systems. Having the WorldCom brand brings credibility as well as new customers, because "they are trusted," he added. The managed hosting market will "fairly soon come to a situation where there's a few big ones left," in Davidsson's opinion. These will probably "either come from a carrier service, or systems integration, or an IT company." Major IT players IBM and EDS will still be around, he said. IBM is currently Digex's main competitor. WorldCom resells Digex's services under its own brand. Access to a large sales force such as can only be provided by a company of WorldCom's size is important, said Davidsson, and he thinks independent providers lacking such backing will struggle. WorldCom acquired a 55% equity stake in Digex through the acquisition of CLEC Intermedia in September 2000. The deal, which gave WorldCom a 94% voting interest in Digex, was initially valued at US$3 billion stock and US$3 billion debt. Intermedia had previously touted Digex to a number of interested buyers including, reportedly, Exodus and Global Crossing. (Exodus later bought Global Crossing's hosting unit for US$6.525 billion). The WorldCom-Intermedia deal hit regulatory and legal hurdles, but was finally closed in July this year