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Intel to close its Web hosting unit
Wednesday, June 19 2002
by Matthew Clark


Intel said on Tuesday that it will wind down its Web hosting business, Intel
Online Services (IOS), and take a USD100 million charge to do so. 

The business, which was established in 1999, will shut immediately but Intel will
continue to provide services to existing customers over the next 12 months and
the firm said it will begin working with those customers to ensure a "smooth
transition." No new customer engagements will be pursued.



The company will not say how many the unit employs but has admitted that the move
will impact "several hundred jobs." A spokesperson for Intel explained that
workers will be transferred to other divisions within the company with no
immediate job losses. However, workers could be affected over the next 12 months
as clients move over to other service providers, the spokesperson said. 



Some existing IOS clints include eBay, Kingfisher and BBC Technology and over its
lifespan the division has performed hosting servcies for other large firms
including Excite, NEC and Citigroup. 



IOS currently has no facilities in Ireland, but does have operations in the UK
(Reading), California, Virginia, Tokyo, Australia, India, China and Korea. 



"While IOS has been successful in attracting new customers, market trends and
financial projections for the hosting services industry lead us to today's
decision," said Dalibor Vrsalovic, president, Intel Online Services Inc. in a
statement. "Our focus now will be to fully support customers and ensure a
continued high level of service while we assist them in their transition plans."






As a result of the decision to wind down IOS operations, Intel expects to take a
pre-tax charge of approximately USD100 million in the second quarter, primarily
affecting cost of sales. The charge is related to the write-down of capital
assets and other costs associated with the phasing out of IOS activity. The
charge was not reflected in the company's mid-quarter update published 06 June.



Intel's decision to exit the three year old business follows a spate of
shutdowns, restructurings and bankruptcies in the hosting business in Ireland and
abroad, with Exodus, Metromedia, WorldPort and Inflow  as prime examples.  



And Intel's decision was not entirely unexpected after Gerry Parker, the Intel
executive who launched the division, left Intel in March 2001 and some employees
of the unit were laid off a few months later. Other non-core Intel businesses
that have closed or been sold in the past two years include its consumer-products
unit which closed  in October 2001 and its Internet Media services centre,
which was sold to the BBC last year.