C&W customers wait to learn their fate

The recent announcement by Cable & Wireless that it is ditching its unprofitable U.S. business has the company's 5,000 domestic customers wondering what the fallout will be for their organizations.

The move by C&W comes after months of assertions by the company that it was not leaving the U.S. market, but only restructuring its business to focus on customers with multinational data needs. But that plan was drafted under a different management team. The carrier's current chairman, CEO, COO and several board members have all joined since January.

At least one C&W Web hosting customer is not rushing to find another provider.

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The recent announcement by Cable & Wireless that it is ditching its unprofitable U.S. business has the company's 5,000 domestic customers wondering what the fallout will be for their organizations.

The move by C&W comes after months of assertions by the company that it was not leaving the U.S. market, but only restructuring its business to focus on customers with multinational data needs. But that plan was drafted under a different management team. The carrier's current chairman, CEO, COO and several board members have all joined since January.

At least one C&W Web hosting customer is not rushing to find another provider.

"We will wait and see," says Phil Gibson, vice president of Web business and sales automation at National Semiconductor in Santa Clara. "Obviously, they could sell this business to another provider. Worst case, they could shut it down, but that is a remote possibility."

Gibson says National has reviewed its infrastructure services for about nine months, since rumors started about the carrier leaving the U.S. market.

"We continue to look at the competitive providers to see if they can offer a better cost-performance alternative to our U.S. hosting," he says.

Although C&W says it is exploring all options, it is likely that the service provider will sell its customer contracts and shut down data centers, and maybe even its network, says Brownlee Thomas, analyst at Giga Information Group.

The carrier owns a national IP backbone and operates about 15 Web hosting data centers. C&W offers Internet access, managed IP VPN, collocation, managed Web hosting and content management services.

"The other option includes Chapter 7 liquidation," Thomas says. Chapter 11 isn't an alternative because C&W does not have any debt that it needs to restructure, but it could choose to liquidate its assets if it does not get a good offer from a buyer, she says. C&W has cash, but has been using much of that to support its U.S. business.

Other analysts expressed their disappointment in the carrier's actions.

"It has just been a horrible mess in how they've dealt with customers," says Andy Schroepfer, president of Tier 1 Research. "The same company that a year ago was spending advertising dollars saying, 'We're the most financially stable . . . we're going to be with you for the long haul,' it's just ridiculous now to have them come back with just the complete absolute opposite statement. I can't criticize Cable & Wireless enough for how badly they've done this. At the same time I can't compliment the new CEO enough for making what is a perfect business decision to get out of the U.S."