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ComputerWire: IT Industry Intelligence

Interland Inc, one of the US's largest small business web hosts, yesterday announced the acquisition of Trellix Corp, which offers web building tools to SMEs,

writes Kevin Murphy

. The deal gives Interland some tools to better compete with Yahoo! Inc, which is eyeing the market, and gives it leverage on at least five rivals that are currently partnered with Trellix.

The Atlanta-based host will pay Trellix's shareholders $4.75m cash and three million shares, a total of $9.75m, plus a five-year option on six million more shares at $5 each. Interland gets Trellix's team, technology, and a channel of 50 distribution partners including the likes of EarthLink Inc and Terra Lycos SA.

"Trellix has the best technology in terms of novice users creating professional quality web sites," Interland VP of strategy Fabrice Klein. The hosted software allows users to build web sites using a web-based interface and templates. Klein added: "They have a really strong network of partners and distribution channels."

The market for SME web hosting is expected to blossom, with the majority of the US's 20 million companies in that category currently without an online presence. There is a lot of room for growth, which is why the likes of Yahoo are boosting their services there in an effort to catch the second wave of adopters.

Buying Trellix allows Interland to become user friendlier for this second wave to help compete with Yahoo's well-used interface. Klein said Trellix's systems are used by about five of Interland's rivals, including Host Europe Plc and Affinity Internet Inc. This could give the company a certain amount of power over the competition.

"In a couple of instances there is the potential for competitive conflict," said Interland's Klein. "A couple of [Trellix's] partners are hosting firms directly in competition with us. We haven't made a blanket decision on what will happen to those relationships. The deal is a good thing for the majority of Trellix's partners."

In some instances Trellix hosts the sites created by its partners' users in its own collocated data center, and in some cases the partner hosts. Interland is expected to migrate Trellix customers to its own data centers and integrate the software into its own blueHALO hosting architecture.

Klein said the company does not expect conflict with the likes of EarthLink, which host web sites but are primarily focused on the consumer market. For a similar reason, Interland is not massively concerned over Yahoo's claim that its brand will help it seize the market. Yahoo's brand is more powerful in the consumer space, Klein argued.

Interland has spent the last two years becoming by some measurements the largest SME host in the US, primarily by using its huge cash pile to acquire floundering rivals. The company is now focused on improving its offering and growing in terms of users organically rather than with purchases.

© ComputerWire

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