C&W customers keep options open

After Cable & Wireless announced that it is abandoning the US web hosting and services market, some C&W users said they will wait...

After Cable & Wireless announced that it was abandoning the US web hosting and services market, some C&W users said they will wait to see whether another company steps in and keep their options open about jumping ship to another provider.

Users said a large overcapacity in the troubled hosting business meant they expected few problems finding a business willing to sign them up - even if they have to find a new supplier in the future.

Russell Kuteman, vice-president of finance at amusement park company Six Flags, which buys content delivery and web hosting services from C&W, said it is still too early to determine whether someone will buy out C&W or whether Six Flags has to go elsewhere.

"Companies like us, that have commerce across their websites, can't afford to be in a risky situation as far as services go," Kuteman said.

"We're going to keep a finger on the pulse [of the situation], and the minute our comfort level moves in the negative direction, we'll be gone."

Kuteman said he expected another hosting provider to step in at some point to take over C&W's hosting customers in the US.

"We enjoy the relationship we have with their people... and they do what they say they will," he said. "We're really keeping our fingers crossed here."

John Godwin, chief technology officer of online movie download service Movielink, said C&W's announcement of a sweeping restructuring and a complete exodus from its money-losing North American business did not come as a surprise.

"I think a number of companies have been in trouble in this economy," Godwin said. "We think they'll handle this very responsibly" by either finding a qualified buyer or giving clients enough notice to make new arrangements. "We just don't think it will have an impact."

Many C&W customers went through this same predicament just 18 months ago when C&W came to the rescue and took over the US business for bankrupt web hosting business Exodus Communications. Now C&W is leaving and will try to find a buyer or other undisclosed options for its customers.

This is the second time in the past seven months that C&W has adjusted its direction and focus in its global strategy.

Last November, the company announced it was paring back its US operations, keeping only its most profitable accounts with its largest global customers. That move, coming less than a year after C&W appeared to be a saviour for former Exodus customers, was not a surprise then or now, said analysts.

"The past year and a half at C&W they've made strides" to slim down, said Ted Chamberlin, an analyst at Gartner. But British and American businesses have different ideas about running their operations, and the leadership at C&W felt that waiting for the market to get better was not helping its bottom line now.

"This market has yet to hit profitability," Chamberlin said. "I think this is a very shortsighted move. In the long run, it will have very serious implications for the company."

Dana Tardelli, an analyst at Aberdeen Group, said the pullout by C&W is "certainly the pendulum swinging back from world domination to a more realistic view". One problem for C&W was that it came to the US market with "no articulated US vision" for its operations.

Andrew Efstathiou, an analyst at The Yankee Group, said C&W got into a business it was not familiar with at the height of the market, which exacerbated its problems later.

"Not only is it a tough business, but it's a different business from what C&W was into" before, he said.

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