Verio Swallows digitalNATION in $100 Million Deal

The Web hosting server market is growing rapidly as more businesses go online, and the popular domain-based Web hosting company Verio (Nasdaq: VRIO) is tapping into this expanding market.

Today, Verio, which provides Internet services for online businesses, announced the acquisition of privately held digitalNATION, which is a provider of server Web hosting, e-commerce and managed application services for large Web sites with high traffic. Verio will pay $100 million (US$) in cash for digitalNATION, which serves clients such as the Discovery Channel and Hamilton Beach-Procter Silex.

The deal adds more than 1,200 dedicated servers to Verio’s Web hosting services. Verio already hosts more than 260,000 Web sites, which it says is more than any other company.

Dedicated server Web hosting is ideal for big Web sites because the dedicated server typically hosts a single site — allotting the entire resources of the server to support traffic, data storage requirements, and software applications. Smaller sites can be operated on shared server hosting. Verio provides both services.

“As companies move more of their business processes and operations onto the Internet, we are seeing exploding demand for outsourced, high-end Web sites as transactional platforms for e-commerce and e-business applications,” said Justin L. Jaschke, CEO of Verio. “The addition of digitalNATION’s leading dedicated server technologies and managed application services further strengthens Verio’s ability to provide the full range of bundled broadband access and Web hosting solutions to growing businesses.”

Dedicated Server Hosting Marketing Greatly Expanding

The dedicated server hosting market is projected to grow from $152 million in 1998 to $5.3 billion in 2003, according to Forrester Research. As the e-commerce market grows, so will the dedicated server hosting market.

Verio is counting on the digitalNation brand to grab a large part of the growing market. Verio will maintain digitalNATION’s branded domain name www.dedicatedserver.com. Verio will also market the digitalNATION services through its 200 direct sales representatives and more than 4,000 domestic and international resellers, online and telemarketing channels.

Verio delivers locally based sales and engineering support in 41 of the top 50 U.S. markets under the Verio brand name and provides Web hosting services to customers in more than 170 countries. Verio could also market digitalNation, which has projected annualized revenues of $9.4 million, as an extension of its OEM program.