June 19, 2002, 9:15 AM — Intel Corp. is scrapping its Web hosting business after less than three years of operation and will take a US$100 million charge in its second fiscal quarter as a result of the move, the company announced Tuesday.
After kicking off its Intel Online Services (IOS) Web hosting business in 1999, Intel is now winding down operations due to a poor outlook for the Web hosting market, the company said in a statement. Intel will support customers who had signed up for the service for the next 12 months while it works to move them over to a new hosting company.
As a result of cancelling the business, Intel expects to take a charge of close to $100 million in its second quarter, related to the write-down of capital assets and other costs, according to the statement. "The bottom line was that future growth and financial projections did not meet Intel's requirements," said Christine Chartier, a spokeswoman at Intel.
Customers of IOS include Sony Corp., The U.S. Army and the American Stock Exchange. The services included managing servers and Web sites for customers.
Its departure from Web hosting comes after many major providers struggled in the business, most notably Exodus Communications Inc., which filed for bankruptcy protection late last year.
Intel once had grand plans for IOS, spending $150 million to build a facility that housed 10,000 servers, three 1.5 megawatt generators, and a 5,000-gallon diesel tank to fuel the generators. The company once planned to open 12 similar centers around the world.
Web hosting isn't the first business that Intel has pulled out of. Earlier this year it said it would close its consumer products division, which produced digital cameras, media players and similar products. This move, along with the end of IOS, marks a trend at the company to refocus its efforts on its core microprocessor business, Chartier said.
"Obviously in the IOS situation, and I am sure with the consumer products division as well, we did extensive research of the business," Chartier said. "We are a large company and have certain requirements for a business unit and looking at those and the overall market trends that we were seeing, they were not looking good for overall performance requirements."
Other companies such as IBM Corp. and Electronic Data Systems Corp. (EDS) could potentially take on some of the IOS customers, Chartier said.