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Sprint eyes Web hosting
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December 12, 2000: 5:11 p.m. ET
Phone company may buy Web hosting firm to attract loyal customers
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NEW YORK (CNNfn) - Beleaguered phone company Sprint Corp. could possibly buy a Web-hosting provider to attract more customers, a spokesman told CNNfn.com.
Kansas City, Mo.-based Sprint Corp. would be open to acquiring a Web hosting firm or data center if it speeds the company's strategy, a Sprint spokesman said.
"Otherwise we plan to grow that part of the business organically," said company spokesman Mark Bonavia.
 News of a possible acquisition caused Sprint Corp. (FON: Research, Estimates) shares, reflecting its so-called FON Group local and long distance wireline operations among others, to rise $1.12 to close at $24.94 Tuesday while Sprint PCS (PCS: Research, Estimates), the wireless unit, gained $1.19 to $28.06.
Sprint Corp. declined to comment on reports that likely candidates may include Exodus Communications Inc. (EXDS: Research, Estimates), PSINet Inc. (PSIX: Research, Estimates), and Digital Island.
Exodus and Digital Island declined to comment, while PSINet could not be reached for comment.
Sprint will also announce information about the opening of its data centers on Wednesday, a source close to the situation said. The company plans to build 11 data centers in the United States by the end of next year and plans to have 18 centers up and running by the end of 2002, the source said.
On Nov. 3, Sprint FON Group cautioned that 2000 profit will hit the low end of Wall Street forecasts, while 2001 results would also fall short of analyst views. Sprint's warning followed an announcement by WorldCom earlier that week.
 Before the acquisition rumors, Sprint FON Group's shares were trading nearly 70 percent below their 52-week high of $71.50 while the wireless unit has fallen 60 percent from its $66.93 year high.
By offering Web-hosting services, Sprint would attract more profitable and loyal customers and help rejuvenate the company's image, the company said at its analyst conference in November.
Whether Sprint will buy or build a data center, is a toss up and will primarily come down to price, said analyst Anthony Ferrugia of A.G. Edwards & Sons Inc. It might be cheaper for Sprint to buy rather than build, he said.
"Sprint might pay a little premium if a firm already had customers," Ferrugia said. "There might be time to market advantage."
Sprint has about $6.2 billion in overall capital spending available for 2001 but only a small amount will go to a Web hosting firm, Ferrugia said. Data centers also offer different services such as shared services and provider managed services, he said.
"Shared services is probably the least attractive," Ferrugia said. "Managed services are the highest margin data service centers."
A data service center will allow Sprint to offer "value-added services" such as e-commerce and outsourced services such as financial and employee management systems, Ferrugia said. 
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Sprint
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