Peer 1 continues to beef up presence in U.S. with second acquisition in a year

Canadian Internet infrastructure firm Peer 1 Network Enterprises Inc. has snapped up its second U.S. acquisition in less than a year, buying Atlanta’s Interland Inc., a provider of online solutions for small and mid-sized businesses, for US$14 million. "We wanted to be in a position to offer our customers whatever level of service they wanted," says Peer 1 CEO Geoff Hampson, explaining the rationale behind the deal. "When Interland came along, we…realized that product was targeted toward a market that requires more assistance and hand-holding and expertise – it was a nice fit into our product mix." Under the conditions of the Interland deal, Vancouver-based Peer 1 will acquire data centres in Atlanta, Miami, and Fremont CA, totaling more than 115,000 square feet of floor space housing approximately 8,300 managed servers. At the same time, Peer 1 announced details of a loan arrangement with private equity firm Celerity Partners, which has extended credit worth US$28 million to the Canadian firm. Peer 1 made use of US$24 million after the acquisition closed, with US$10 million going to pay down the company’s existing debt. Last October, Peer 1 acquired San Antonio TX-based ServerBeach Ltd. for US$7.5 million (NL, Oct. 14/04), a move Hampson says gave the Canadian firm a leg-up in a very different space: managed server hosting. "What we liked about ServerBeach was it was very highly automated, it was geared to customers who already had knowledge of how to operate and manage their own servers, so it fit into the customer base we already had." Once ServerBeach had been folded into Peer 1’s operations, he adds, "we found was there was a natural migration of companies from managing it themselves to outsourcing a portion or all of their infrastructure to somebody who would manage it for them." Thus began the morphing of Peer 1, which started in 1999 as a co-location firm – a service traditionally associated with larger businesses with more of an IT budget to spend on owning their servers outright. "We started out with…co-location and bandwidth, the customers basically are controlling their own hardware and their own application," Hampson says. "When we recognized that the market was shifting a little bit so that people were starting to not only outsource the data centre and bandwidth sides of the business, but also outsourcing the hardware, we looked at setting up our own dedicated server business." Hampson continues: "We saw an opportunity to go after small- and medium-size enterprises because, in reality, the cost…of renting a server in a secure datacenter is relatively small compared to the if their Internet connection was to fail, or their servers were not in a location redundant power and proper cooling and so forth. We really see the service that we offer our customers as sort of an insurance policy." Rather than go down the costly road of building a managed dedicated server offering virtually from scratch, the company "decided it would be better for us to acquire a dedicated server business that had already developed the automation technology the market presence and required data centres and bandwidth as part of its service offering," hence the ServerBeach acquisition, Hampson says. With such a large network spanning the U.S. and Canada, Peer 1 was in the position last year to offer peering services to other network providers and operators for free (NL, June 22/04). "Unless you’re the very biggest you need to buy transit from somebody, because there are always remote networks that you can’t get to physically," Hampson says, explaining the decision to offer peering. "The more peering that you do, the more addresses you can advertise – it actually drives more traffic onto your network, because you’ve got better performance to more distinct networks." Hampson says the firm is still very much in expansion mode, and is eyeing an expanded presence in Europe – "we already have a network presence in London, and we’re a member of the London Internet Exchange," he says – as well as anticipating a move into Asia sometime next year.

Peer 1 continues to beef up presence in U.S. with second acquisition in a year

News | 09/16/2005 4:00 am EDT

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