C&W Bails Out 220
norskode writes "Not much to go on yet, but it seems that Cable & Wireless is bailing out of their US operations. This is a big provider of IP pipes, and they run the data centers they bought from the failed Exodus folks. There are a LOT of sites that live in their data centers, but no word yet on the disposition of those facilities."
Not a whole lot left... (Score:5, Interesting)
This really doesn't make sense.... (Score:5, Interesting)
The reason Ellen and her gang couldn't keep this running seemed to be they kept building new data centers. Capital costs were HUGE.
But C&W bought exodus. After the fallout. For very very cheap.
How could they not make a profit off this? Is maintaince costs still so high even with no expansion? They were CLOSING data centers not buiding them.
This worries me, because if after the initial build up is done, you still can't make money off a colo then that means prices are WAY too low and for the 2 or 3 colo's left, we are going to see prices sky-rocket to come up to meet expenses.
Sad day.
They've been working on this for a while now (Score:2, Interesting)
This could get ugly (Score:4, Interesting)
Another Blow to Internet Stocks (Score:2, Interesting)
As competition continues to slim down, I am afraid that it is greatly going to increase the baseline costs of these large internet companies. Of course, this will eventually make its way down to us.
Competition is good. Although I would hate for the government to regulate the internet, grants and loans for improvement of its foundation
would help keep the current system strong and affordable.
Davak
Re:C&W (Score:4, Interesting)
Re:right off the top of my list... (Score:4, Interesting)
Mae-East (Score:5, Interesting)
Re:Infrastructure (Score:5, Interesting)
That's what I thought when my last place of empoyment went out of business - somebody would buy us and merge our network with theirs, or they'd just buy our 160,000 residential broadband customers, transition them to their network, and then dump us. Neither happened; the customers got screwed.
Re:This really doesn't make sense.... (Score:5, Interesting)
When they bought the data centers, they also bought all the contracts for leasing, etc., which probably run for several more years.
Ask companies like Verio about the bloodbath when they shut most of their new data centers down, but were left with 5 or 10 year contracts for those spaces, sometimes in extremely expensive locations. A lot of the equipment, like the big chillers and the fire suppression systems, probably still hasn't been paid for, either.
C&W is looking at with its data centers, I'm sure. Not to mention that they probably have a lot of fiber sitting dark (unused) right now, and lots more under contracts for less than the fixed costs. The salesmen for most of these carriers, by 1999, 2000 and 2001, undercut each other to the point where they were writing money-losing contracts, just to meet their quotas and get their commissions. And quite often, the contracts went to companies that then cancelled or went out of business when the bubble burst.
Re:This really doesn't make sense.... (Score:3, Interesting)
*foom*
Clueless (Score:3, Interesting)
I read the dead-tree version) cited the
basic problem in the telco industry as being
overcapacity, but then goes on to quote
the C&W prez as saying that they're going
to try to resell excess capacity to make
up losses.
The're also going to try to "hang on to
existing revenue streams" while exiting
the US Market (so, exactly what valuable
assets are you selling, and who, exactly
is buying ?)
Also says that the blulk of their revenue
comes from web hosting...there's a winning
1998 market (I just left a large recently
renamed telco doing securtiy for web hosting).
It's corporate "leadership" without a clue.
---eludom
no surprise (Score:2, Interesting)
They even had boxed it all up nicely for us. You'd think they would want to hold onto this for a bit. By the looks of the center, they certainly weren't hurting for free rack space.
I still get messages about maintenance and routes going down, almost daily. *sigh*
Mirrors (Score:1, Interesting)
Worst company ever (Score:2, Interesting)
Poor C&W (Score:2, Interesting)
Yet another reason that it should have been Bernie Ebbers and John "The Internet Doubles Every 90 Days" Sidgemore in handcuffs yesterday, not Martha Stewart.
It's easy to lose money ... (Score:5, Interesting)
I used to work for a customer of Exodus/Cable Wireless, and saw the exodus from Exodus. I remember the boom years when I only went in on Sunday because that was the only day I could get a parking spot and not have to park across the street. I remember when you could see Dell and Compaq and Gateway and Sun systems in every cage, wall to wall. When you could sit in your cage and have conversations with two or three other customers and learn some really neat stuff. Where the soda and chips were only 25 cents. Where security walked you to your cage and unlocked it for you.
The last few years saw the datacenter become a ghost town. Granted, it was a 62 degree ghost town, but still a ghost town. Where every cage around ours became empty, and we even went from a full cage to a half cage thanks to faster and smaller equipment. The parking lots are never full, soda and chips are now priced the same as everywhere, and no one to talk with. And now security gives you the key to your cage and you walk past rows of empty plastic-coated wire mesh cages.
How do you lose money?? Because you have to run a gazillion foot data center, with all of it's associated infrastructure needs, and you don't have any customers in it. Compare it to the cost of running an apartment building if it is only half occupied. There are still maintenance costs, but now you only have half the tenants to cover it. You still have to heat and cool the empty apartments, although not the same as the rest, and you have no one to pay for it.
Don't get me wrong though. I loved the facility. It was clean and well maintained. I could get away from the home office and work without being interrupted. I didn't have to worry about AC and power and network outside of our cage. If C&W was still a viable company, there would be no hesitation about using them for a data center.
But the 90's are over
A classic case of mismanagement (Score:5, Interesting)
New offerings were brought up and provisioning and billing systems were rushing into place(sometimes). Often a new product would have to be provisioned manually and there was no way to tell if a customer wasn't paying their bill for well over a year after they first started selling the product.
Then to top it all off the mothership(PLC) decided they were going to become a global organization and they ended up picking up the biggest inept blowhards in CWUSA to help create the global organization. While all this was going on they were still having their yearly layoffs, which they did even when they were making a billion a year. Management would lay off the workers and keep the management around. It was not uncommon to know of managers and directors with no people.
Not long after I left they decided to lay off all the techincal people and outsource the work to IBM. Many people were gone for good and many were tranferred to IBM. But the funniest thing about this grand plan was the first task of the plan-- assign a senior management team to organize the layoffs(to them management teams were the "magic pixie dust"). Those people were so management happy that they have a few building in Vienna Virginia stocked with managers, senior managers, director and AVPs that are quite adept at bullshitting, creating powerpoint documents and dodging bullets but they can't manage a damn thing. I could write for hours about the shenanigans that went on in that place but I'll just end with something an old relative who has been a businessman since WWII told me. "Anyone can make money when times are good, it's when times are tough that you find out who the real businessmen are." They were poseurs and it was only a matter of time before their hubris coupled with reality bite them in the ass. The sad thing is these same losers will end up getting nice cushy management positions at Verizon, Worldcom or AT&T and probably for more money.
no customers == no money (Score:4, Interesting)
I've walked around a bunch of the old Exodus datacenters in New York City: even the "older" ones (ie the former GlobalCenter colo on 8th avenue, and the original NJ1 at Exchange Place)) were like ghost towns: row after row after row of empty racks.
The colocation "boom" of the 1990s was a pyramid scheme: VC-financed colo companies selling space at completely fictional rates to VC-financed startups. As soon as the venture money dried up, the small customer vanished...and then the big customers vanished...and then the behemoths themselves began to die off.
No matter how much you cut your costs, you can't make a profit if you have no customers.
My completely off-the-cuff guess is that even if C&W mothballed 90% of their colo facilities in the US, and all of their competitors (UUNet, AT&T, Globix, Level3) did likewise, there would still not be enough customers to keep them afloat. Colo is expensive, and there just aren't that many companies who actually need six-sigma uptimes. (Not that any of the colo providers ever came anywhere near their promised reliability numbers in practice, but that's a whole different rant.)
C&W Leaving US Been Coming for quite some time (Score:5, Interesting)
http://www.practical-tech.com/network/n04172003
Long story short, stupid business plans and lousy management equals failure. C&W's US business had both in spades. The real question, from where I sit, is will C&W continue to survive in the UK? That was unthinkable only a few years ago, but they've made so many bad moves recently and bleed out so much capital you really have to wonder.
Steven
Re:It's easy to lose money ... (Score:1, Interesting)
When I got involved in Exodus (mid 2000), they were expanding at 40% per quarter, and while working for a contracting business is painful, working for one which is growing at that rate is also painful. To get capacity available as fast as the growth trend was indicating it would be needed, a lot of debt was used to finance expansion, and long term leasing deals were made without due diligence - judgement was clouded by the need to get capacity now.
Of course, many of the customers seemed to have the same business plan:
1) Get some venture capital
2) Spend it all on marketting, with a little going on creating a website
3) Lose lots of money
4) Get more venture capital
5) er
6) that's it
7) go bust
but all the sanity about the creditworthiness of your customers was again subjugated to the frontier mentality of getting market share.
Of course, the later history is well rehearsed. The first warning sign for me was when I was sent on a training course and told "pay with your credit card and claim it back" - to me that could only mean that the company was no longer creditworthy, and I sought employment elsewhere. Eventually C&W took over the datacentres and left Exodus as a rump campany with nothing but a load of debt. But those datacentres (particularly in the US) were based on long and expensive leases, which were transferred to C&W - hence the inherited liability.
The sad thing is that, then as now, Exodus/C&W is a top provider of space and power and bandwidth, with excellent connections. But they massively overexpanded in a wasteful and ill-advised fashion, and the liabilities are still dragging them down.
Re:This really doesn't make sense.... (Score:3, Interesting)
I can easily see C&W losing a million bucks a day.
It's kinda funny. Folks have been saying for -years- that my previous employer's pricing was out of line with "reality" and was "too expensive". Come to find out, they were pricing things almost -precisely- right, and not caving to pressure from outside to cut prices, and they're -profitable- (and have been for, like, 2 years now)...the company is 7 or 8 years old).
However, they -don't- do CoLo. There's no money in it. Managed hosting and hosting services, on the other hand, is a cash cow that -very- few companies are doing (or doing -well-).
*shrug*
I'm not suprised. Exodus imploded, Verio's been in the process of imploding, Rackspace supplements their income through sales of hardware and cuts their costs by building their own rigs, Alabanza is profitable, Interland may as well have imploded, etc. Basically, Alabanza and Rackspace are the two winners out of the entire industry, and -noone- is really competing well with either of them.
Phaeton Sez (Score:1, Interesting)
"btw, we're pulling out of X% of our US markets. Your pipes will be shut off in 30 days. Yes we know that we've got a 7 year contract agreement, but well, too bad. have a nice day".
This resulted in legal action on our part and a lot of frantic searching for other providers. It all shook out ok in the end, but it there was a lot of sleepless nights for some time.
this would be true if... (Score:3, Interesting)
The problem with this idea is that there is no significant barrier to entry in the low-end colo or hosting market, other than running fiber to a facility. As soon as the rates for hosting go up, a lot of people will look for cheaper ones, and you'll see another crop of low-end companies start up.
Don't forget that even that barrier is significantly reduced by the fact that the capacity is always there on most of that dark fiber, so they have an incentive to sell it, as long as they haven't pulled it out of the ground and turned off the power to it. Not to mention that Verio and other former players in the big data center market will still be looking to get out from under some of the leases for their closed facilities, for at least the next couple of years. Even if they default on their leases, the building owners will be much happier leasing you the facility as is instead of having to rip out all the heavy infrastructure modding.
Hosting's going to be a commodity market for a long time, if not from now on, I think.