September 7, 2005 - (HOSTSEARCH.COM) - Web host Interland today announced that it has sold its dedicated server assets to Peer 1 Network Enterprises, Inc., a provider of high performance Internet infrastructure, for a purchase price of approximately $14 million in cash. Under the terms of the agreement, Peer 1 Network acquired approximately 8,300 servers, as well as operating facilities in Atlanta, GA, Miami, FL, and Fremont, CA.
The dedicated server assets accounted for approximately 37% of Interland’s revenues for the nine-month period ending May 31, 2005.
“The sale of the dedicated server assets is an important milestone in our restructuring plan and allows Interland to invest in our core lines of business - providing Web sites and online services to small and medium-sized businesses,” said Jeffrey M. Stibel, CEO of Interland. “This transaction gives the company increased financial flexibility and is the first step toward focusing on our core competencies while realigning our revenues with high margin, high growth business initiatives.”
The company’s dedicated customers, which represent approximately 5% of Interland’s total
accounts, should experience no immediate change in services and should receive continuity of Web site operations under Peer 1 Network. The goal is to ensure a seamless transition for employees and customers, enabling both companies to focus on their core lines of business. Interland will provide more detail on the transaction's impact on its business in its future SEC filings and on the next quarterly earnings conference call.
Disposing of the dedicated server assets will allow Interland to realize significant savings, including long term lease obligations associated with the three data center facilities, capital expenditures associated with the ongoing purchase of dedicated servers, multiple bandwidth contract eliminations, and a substantial reduction in the number of employees. The $14 million in gross cash proceeds will be reduced by $2.8 million that will be held in an escrow account for 12 months and by approximately $1.4 to $2.2 million in transaction-related expenses. The company expects that the transaction will have a net negative effect in the range of $1.5 to $3.0 million on its reported net earnings for its fourth quarter mostly as a result of non-cash charges.
Under the deal, Interland employees will continue to run the dedicated server business, under Peer 1’s management, for approximately 90 days after closing. Peer 1 will have the opportunity to extend employment offers to those employees during the 90-day transition period.
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