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Technology Stocks : AboveNet Communications, Inc. (ABOV) -- Ignore unavailable to you. Want to Upgrade?

To: Bill27 who wrote (644)	5/24/1999 1:34:00 PM
From: KS	Respond to of 835

May 24, 1999 13:26 Abovenet buys Compaq Internet network facility SAN JOSE, Calif., May 24 (Reuters) - AboveNet Communications Inc. , a supplier of managed Internet services, on Monday said it agreed to acquire a network exchange facility for managing traffic over the Internet from Compaq Computer Corp. for about $75 million. AboveNet will acquire the assets and liabilities of Compaq's Palo Alto Internet Exchange -- the only commercial Internet Exchange (IX) facility not owned by a major phone company -- for about $70 million in cash plus an agreement to provide certain ongoing services to Compaq. Internet exchanges act as key transfer points for high volumes of traffic on the hub-and-spoke network of networks that, linked together, constitute the Internet. In essence, such exchanges are collections of powerful computers and phone circuits that function like telephone operations centers. As an independent, PAIX provides direct connections between Internet service providers (ISPs) without requiring the ISPs to run their traffic through phone company networks. "Neutrality means that we can offer ISPs a wide choice of carriers, that we encourage direct connections between ISPs and that we do not offer services that would compete with our customers," said Laura Hendriksen, general manager of PAIX. "By offering the best facilities and facility management services to all ISPs, PAIX will be improving the performance and reliability of the Internet," she said. In its statement announcing the deal, AboveNet asserted that the performance and reliability problems that occur on the Internet are often tied to the facilities, business policies and connections at many Internet Exchange points. Many of the Internet exchanges owned by telecommunications companies require ISPs to buy Internet communications lines only from the phone company and discourage the use direct connections between ISPs within the Internet exchange, AboveNet said. Since its inception three years ago, PAIX has developed a reputation among ISPs because of its neutral policies and superior facilities and services. PAIX is located in the same building where Compaq's AltaVista Internet unit is located. PAIX was acquired by Houston-based Compaq as part of its $8.4 billion merger with Digital Equipment Corp. PAIX began operations in July 1996 as the Network System Laboratory for Digital's research group based in the heart of Silicon Valley. AboveNet said PAIX would be operated as a separate corporation, retain its current management team and have its own board of directors. The company said PAIX would invite reputable industry leaders to serve on an advisory board that oversees the continuation of PAIX's policies of neutrality. The deal, which was signed May 21, is expected to close in two weeks to a month, an AboveNet spokeswoman said. The closing is subject to customary conditions, including the receipt of certain regulatory approvals. Compaq spokesman Alan Hodel declined to comment on financial terms of the PAIX deal, saying it was immaterial to the computer maker's financial results. He said the move allowed Compaq to dispose of a non-core asset and at the same time realize the financial value of the operations. "For Compaq, what it's all about is realizing the value inherent in the asset while retaining access to the services," Hodel said. AboveNet stock fell $1.69 to $32.12 in late morning trading Monday on the Nasdaq stock market. Compaq was trading at $25.12, unchanged on the day, in U.S. stock market activity.