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AT&T; Sells Off Small Biz Hosting Accounts

January 25, 2002

By Erin Joyce

Small business Web hosting company Interland, Inc. (Quote, Chart), is buying customer agreements and other assets from AT&T;’s small business Web hosting divisions as the phone giant sharpens its focus on large-scale customers.

The Atlanta-based Interland said it acquired the small-business and dedicated Web hosting assets from AT&T; (Quote, Chart), a deal that also includes some intellectual property.

The value of the transaction ranges from $4 million to $12 million, depending on how many of the small business accounts transition over to the Interland, the companies said.

AT&T; said the sale in no way diminishes its commitment to serving small business customers in its other market segments. A company spokesperson called the sale part of AT&T;’s strategic focus of delivering managed hosting services to medium and large business clients.

This week AT&T; took the wraps off an expanded range of managed hosting services for major enterprise customers and large businesses around the globe. The network expansion includes enhanced VPN services, security services, managed wide-area networks and content distribution.

Most of the small business accounts it sold to Interland were said to be in the range of $25 a month to just under $800 a month.

The purchase is part of Interland’s plan to use its $170 million cash hoard to grow via account acquisitions. Among its account base of over 300,000, Interland services small businesses with as few as 100 people. The only way to hit cash flow breakeven, which it predicts will happen this year, is to build more scale into its operations.

As one of a handful of Web hosting providers surviving the shakeout that hit the crowded sector after financing dried up, Interland has plenty of choices on asset sales. But it appears to be playing it safe as well, such as a recent decision to call off the purchase of two Web hosting subsidiaries from bankrupt provider e.spire Communications on concerns over debt liabilities.

AT&T; said the sale represents less than 2 percent of the total base of small business customers it services.

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