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First, do you guys serve sushi in the Englewood cafeteria now?
Interestingly enough, we had a core group of people who have always been sushi aficionados. The difficulty now is that when we go to Tokyo and eat sushi there, it is hard to be as satisfied with sushi in Denver. Last time Mr. Suzuki [Masanobu Suzuki, president and CEO of NTT] and NTT execs were here, we took them to a rodeo in Denver and offered them some Rocky Mountain oysters.
And?
They loved the rodeo; the Rocky Mountain oysters they passed on. They are taking us to a sumo match next time we are in Tokyo.
On a serious note, we have just seen the relationship between Spains Telefónica and Lycos blow up because of cultural differences. How is your relationship with NTT working?
There are definitely cultural differences, but we had an advantage of working with them for two years in a partnership format. We got to be good friends with them, and understand how we each think about the business. Communications always takes some effort over there, you need to have more back-and-forth, but we clearly understand each other.
Where is Verio headed in 2001?
Extending the global reach of our products, mostly on the managed hosting and global network side.
Whom do you see as competition?
In the global network business we see WorldCom, Sprint, and it starts getting thinner after that. Youve got Cable & Wireless, and they have struggles of their own. You have emerging players like Global Crossing, which is struggling in these economic times as well. The second set of competitors is around the managed hosting business, and there you see Exodus, Digex, now part of WorldCom, and Qwest [Communications International] in combination with IBM and Hewlett-Packard.
In hindsight, our [merger] timing was impeccable and we are fortunate to be in the position of strength and to continue to invest and execute on our business plan. A lot of customers will be looking for a stable place that could give them the security of being around in the long term.
Help us understand how much money Verio made on Web hosting last year.
We made about $350 million in 2000, which was 60 percent hosting.
How is the Web hosting market changing?
While dot-coms were the big buyers last year, a lot of that demand has gone away. The customers you are seeing now are much more brick-and-mortar companies and established businesses that are figuring out how to streamline their business and increase productivity with the Net. That is also driving the demand for application and managed services. We see shared hosting as a market that is still growing overseas, but the market domestically has moved more toward the higher end.
We hear you are planning some managed services announcements.
I think you will see a series of announcements as we launch managed services. The most recent is the agreement with Riptech that will be launching a managed hosting service. Then you will see packaging of those into enterprise hosting platforms and launches of those.
So what is your managed services plan?
We are putting our focus into enterprise hosting applications, managed services like data backup retrieval, caching capability, clustering capabilities and so forth. We have concentrated on a more basic set of managed services and a managed-services delivery platform. Getting that platform in place then lets you add more managed services. Today, we have bandwidth and utilization monitoring, remote power reboot capabilities, data backup through Arsenal Digital Solutions [a storage service provider] and data security through Riptech. We offer other [services] that have not been integrated into our platform, some of which are not even on our Web site, like global caching applications.
How do you see the Internet service provider, carrier and Web hosting space this year?
I think there are some interesting acquisition opportunities out there. The correction in the market has made everything more correct in terms of valuations. Last year, we were focused on internal growth. But we are at the point now when there are some interesting plays out there.
Such as?
We think they are more on the Web hosting side, and that covers a broad range, we would say more toward more advanced hosting and into the managed service and into the application services area. We are taking an interesting approach there with our partnership with Agilera. They have recently acquired another company, and we are looking at that as a vehicle to consolidate some application hosting providers — thats another market that is crying out for scale.