Loudcloud, Intel Call a Halt to Web Hosting Businesses

Loudcloud Inc. and Intel Corp.'s Online Services group are the latest companies to abandon the Web hosting arena.

Loudcloud Inc. and Intel Corp.s Online Services group are the latest companies to abandon the Web hosting arena.

Loudcloud sold its IT operations service to Electronic Data Systems Corp. for $63.5 million last week, while Intel began a shutdown of its hosting business.

Loudcloud, of Sunnyvale, Calif., will turn to selling its Opsware automation software as a stand-alone product and is renaming itself Opsware Inc., company officials said. EDS, of Plano, Texas, will inherit most of Loudclouds 50 customers and 140 related staff, officials said. Loudcloud will lay off another 120, leaving the company with about 100 employees, including much of the executive team.

"It is definitely a different vision than when we started the company. The environment really dictated the change," said Chief Technology Officer Tim Howes, a Loudcloud co-founder. As for the companys vision of automating a businesss IT, "I think that wouldve been a great business, and I think its going to be the great business for EDS, [but] we would have had to double our customer size and revenue count just to get to scale and profitability," Howes said.

Howes, who co-invented LDAP, will work with co-founder and Chairman Marc Andreessen to expand Opswares product road map.

Opsware 3.0 debuted last month, but the next version, due later this year, will likely have a new name along with support for a wider networking stack; more applications; and new modules for multiple data center uses, trouble ticketing and billing, Howes said.

Some users never received the value they had hoped for from Loudcloud. Acteva Inc. was one of its first customers, but the online event planner could not justify the cost. "It was hard to bet against Andreessen at the time," said Brian Hoover, vice president of engineering for the San Francisco company. "They were charging 10 times the amount anyone else was for the same level of service."

Intel, of Santa Clara, Calif., announced a 12-month window to enable users to move to other services. The chip maker has been working to cut expenses to help counter slumping overall sales. Although Intel never revealed revenue figures for its hosting business, which it launched in 1999, the company confirmed that sales and profits had fallen short of goals.

IOS isnt Intels first failure in services. Pandesic LLC, an application provider created with SAP AG, opened in 1997 and closed in 2000.

Intel said it will refocus its efforts on its core chip-making business, which accounts for more than 90 percent of the companys profits.

Demand for Web hosting services surged in the late 1990s, mirroring the explosive growth of Internet-based companies. But Web hosting companies saw sales evaporate following the dot-com crash of 2000 that witnessed the collapse of thousands of Internet startups.

Since then, the industry has been mired in a slump that has felled some of its biggest players, including Exodus Communications Inc., which filed for bankruptcy protection in September.

Additional reporting by Ken Popovich