Intel Shutting Down Web Hosting Business

Intel

Intel expects to take a $100 million pretax charge in the second quarter related to write-downs of capital assets and other costs associated with shutting down Intel Online Services.

The company said it would support existing customers over the next 12 months.

Intel jumped into the hosting fray in 1999 with high expectations, opening its first data center in Santa Clara. The plan was to offer "second-generation" hosting, which encompassed managing servers, network connections, operating system software and basic applications.

Later that year, Intel opened a second 73,000-square-foot facility at a cost of $130 million. The company had planned to have 10 data centers on-line by 2000, with its sights set on centers in London, Tokyo and Korea.

By 2001 Intel said it would spend $1 billion on its hosting business.

Initial partners included US Interactive, which filed for bankruptcy protection in 2001; iXL, now part of Scient; Proxicom, which was folded into Compaq; Razorfish; PricewaterhouseCoopers; and UUNET.

At the peak of the hosting hype, companies such as Exodus poured millions of dollars into data centers.

In 2000, AT&T, British Telecom (BT) and their jointly owned company, Concert, revealed plans to build 44 data centers in 16 countries at a cost of about $2 billion.

By October 2001, AT&T and BT pulled the plug on Concert, a move that cost 2,300 jobs and $7 billion in charges.

Meanwhile, KPNQwest, the joint venture of Qwest Communications International and Dutch ISP KPN Telecom, expanded Qwest's existing relationship with IBM to include the development of up to 18 new Cybercenters.

Later known as Qwest Cyber.Solutions, KPN pulled out of the joint venture, and Cyber.Solutions was folded into Qwest in 2002.

GTE Internetworking, which later became Genuity, also planned to open seven data centers in 2001.

At the time, consulting form Forrester Research estimated the Web hosting market would grow to about $14.7 billion in 2003 from $3.5 billion this year.