Cable & Wireless America has announced the sale of its US hosting business for $125m to an affiliate of Los Angeles-based Gores Technology Group.
In an attempt to draw as much capital out of the sale as possible, C&W will put Cable and Wireless America into Chapter 11 bankruptcy, restructure the company to eliminate and renegotiate some lease and other contractual commitments, and sell the majority of the company to Gores.
"Customers now know the next step, and there's a process in place," said C&W spokesman Chad Couser. "The buyer of the company is very experienced in turning around businesses like this, and they're deeply committed to making this work."
The announcement was welcome news to C&W web hosting customer National Semiconductor.
"Now we can fully get back to business," said Phil Gibson, vice president of web business and sales automation at National Semiconductor. "Performance has been good since the rumours began nine months ago. We've experienced solid service with improving performance."
National Semiconductor has extended its contract through June.
C&W asserted it will continue to provide service to its remaining domestic customers and committed $100m in funding to Cable & Wireless America as the restructuring and sale makes its way though bankruptcy court.
Gores was also quick to reassure the company's customer base that service would not only continue without a change in quality, but would improve once the sale had been completed.
Terry Fahn, a spokesman for Gores Technology Group, said, "Through our unique skills set, we can identify things that can be improved upon."
The sale, scheduled to be finalised in February, will close a tough chapter for parent company Cable & Wireless, which spent $575m to buy the US operations as part of a deal with former hosting company Exodus Communications in November 2001 after Exodus went bankrupt, leaving customers unsure about where they would get services for their websites.
A year later, C&W announced a restructuring that cut back its US operations and then in June this year announced that it was seeking an exit strategy to leave the US.
Cable & Wireless America is continuing with previously announced layoffs and other cost-cutting steps as the sale approaches.
Todd R Weiss and Laura Rhode write for IDG News Service