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Intel to close Web host business

Takes $100m Charge

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ComputerWire: IT Industry Intelligence

Intel Corp is to wind down its Intel Online Services Inc web-hosting subsidiary at a cost of approximately $100m, the company said yesterday. The closure, expected to take 12 months, is Intel's response to "market trends and financial projections" reflecting the decline of the post-dot-com hosting industry.

An Intel spokesperson said most of the hundreds of people employed at the unit will be given jobs within Intel's internal IT department. IOS's eight international data centers will also be kept running for in-house purposes. From this week, IOS will not approach any potential customers for business.

The company has never disclosed how much revenue it gets from IOS, how many customers it has, or how much it has invested in the service over the last three years. But the company said in 2000, when it opened its $150m UK and $130m Virginia facilities, that it intended to invest $1bn to build data centers by the end of 2001.

As a result of the closure, Intel will take a pre-tax charge of about $100m in the current second fiscal quarter, relating to the write-down of assets and the costs of phasing out its IOS services. The charge was not reflected in Intel's second-quarter profit warning two weeks ago, when it lowered revenue guidance on weaknesses in Europe.

"While IOS has been successful in attracting new customers, market trends and financial projections for the hosting services industry lead us to today's decision," said IOS president Dalibor Vrsalovic. He added that the company will continue to support existing customers while they move to other service providers over the next 12 months.

Intel launched IOS in September 1999, claiming it was to offer "second-generation" hosting services. Second generation evidently meant premium managed hosting with a quick time to market commitment. Launch partners included iXL, PricewaterhouseCoopers, Proxicom, Razorfish, US Interactive, and UUNET.

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