Intel Phasing Out Web Hosting Service

Intel Tuesday said it will slowly shut down its Intel Online Services (IOS) Web hosting business over the next 12 months.

As a wholly owned subsidiary of the Santa Clara, Calif.-based chip making giant, IOS provides managed Web services, mostly for businesses, but also for some of Intel's internal operations.

The company said it will continue providing services to an undisclosed amount of existing customers in the U.S., Europe, Asia and Japan and help them transition to other services over the next year. No new customers are being accepted.

The decision comes a day after computer-services giant Electronic Data Systems Corp. said it had purchased Loudcloud Web site management business for $63.5 million.

The move rings similar to other Web hosting companies that have sputtered or filed for bankruptcy, such as Exodus Communications.

"While IOS has been successful in attracting new customers, market trends and financial projections for the hosting services industry lead us to today's decision," said Intel Online Services president Dalibor Vrsalovic. "Our focus now will be to fully support customers and ensure a continued high level of service while we assist them in their transition plans.

The company said IOS and its technology would eventually be absorbed into Intel's worldwide information technology operations. A company spokesperson said it was too early to tell if the changes would result in job cuts.

Intel Online Services' primary focus is the delivery of second-generation Internet application hosting services. The company also purchases, assimilates, and installs all the hardware and software necessary to run applications.

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The service, called AppChoice, includes a controller that allows hardware, operating system, applications, storage and network infrastructure to be managed as a single unit, called a "customer pod".

The subsidiary manages the operations of that pod and works with the customer to automate routine and administrative tasks, such as repairing, troubleshooting and server provisioning.

IOS's client list includes such big names as eBay, Akamai, the Discovery Channel and PricewaterhouseCoopers.

The IOS service was also one of the first companies to be certified by Microsoft Corp. for its Gold Certification Program for Application Infrastructure Providers (AIPs).

"In the course of building IOS, we developed advanced technology that automates and standardizes key Web hosting functions, as well as operational expertise that enabled us to deliver some of the best service levels in the industry," Vrsalovic said.

Founded four years ago, IOS opened its first two Internet service centers - a major production facility in Santa Clara, Calif., and a development facility in Folsom, Calif.

The company also supports a major Internet service center in Northern Virginia, and developed centers in Japan and England.

The consolidation is part of Intel's goal of becoming what it calls a "100 percent e-corporation."

Other Intel ventures to get adjusted or dropped include a streaming media division, an e-commerce group and a consumer-electronics group.

As a result of the decision to wind down IOS operations, Intel said it expects to take a pre-tax charge of approximately $100 million in the second quarter, primarily affecting cost of sales. The charge is related to the write-down of capital assets and other costs associated with the phasing out of IOS activity.