Divine Buys Service Provider Data Return Corp.

Divine Inc. buys Data Return Corp. in a continuing bid to establish itself as a Web hosting power.

Data Return Corp. is the latest first-generation service provider to go under new management.

This time, the buyer is Divine Inc., the venture capital firm turned technology provider. For about $33 million, Data Return became Divines third major Web hosting component, following the acquisitions of Intira Corp. in July and marchFIRST Inc.s HostOne division in April. The hosting business of Chicago-based Divine should be profitable next year, CEO Andrew "Flip" Filipowski said in a conference call on Friday.

As part of the plan, Divine will lay off some of Data Returns technical employees, but retain the customer-facing staff, he said.

"Whats important is that we dont have the baggage and we dont have the financial hole that many companies have to climb out of," Flipowski said.

Next on the agenda, he said, is for Divine to fill geographic holes in its hosting puzzle, specifically in the Northeast, Asia, Canada and Latin America. More acquisitions in content management and infrastructure are also probable, he said.

However, he said, a bid for bankrupt hoster Exodus Communications Inc. is not likely.

"We did some investigation. Theres no way to wipe the slate clean," he said, referring to the Santa Clara, Calif., companys $3 billion debt. "Thats not really feasible or possible with Exodus."

Another part of Divines hosting plan is to partner with larger players like IBM, so Data Return could take over customers that IBM wont turn away but cant cost-effectively manage.

"It would make a lot of sense for us to spend significant management effort to do that," said Sunny Vanderbeck, chairman and CEO of Dallas-based Data Return. Vanderback will be in charge of the new Divine Managed Services group.

"What we have always looked for is a better distribution channel. We now have access to a sales force of 300 [and] a customer base of 10,000," Vanderbeck said.

Divine currently owns data centers in Pleasanton, Calif., and St. Louis, and uses Level 3 Communications Inc. facilities elsewhere.

Reaction from industry observers was optimistic.

"Theyve grabbed some really good intellectual property out of the Web hosting market. I, for one, am happy to see them land on their feet ... in what I hope will be good hands," said Jeanne Schaaf, an analyst with Forrester Research Inc., in Cambridge, Mass. "This is a very heartening turn of events."

Also, she agreed that an IBM partnership is likely, as the Armonk, N.Y., tech giant already has similar deals with Conxion Corp., of Santa Clara, Calif., and Telenisus, of Rolling Meadows, Ill.