WorldCom moves ahead with Web hosting

(Telephony) WorldCom will forge ahead with an expanded Web hosting business with or without Digex, the crown jewel of its $4.4 billion Intermedia acquisition.

The Federal Communications Commission (FCC) yesterday gave the deal its approval, clearing the last regulatory hurdle, but it's still mired in legal complications that could end up costing WorldCom a ton of money and cloud WorldCom's strategy to become a global Web hosting provider.

"I'm confident that we'll get the deal done, and that's about all I can say at this point. It's very complicated, a lot of moving parts," said WorldCom COO Ronald Beaumont, speaking at an executive forum at the company's Northern Virginia headquarters yesterday.

Delaware Chancellery Court Judge William Chandler last month declined to block the Intermedia transaction but told dissident Digex shareholders he might deliver a ruling that would prevent WorldCom and Digex from working together for three years. The shareholders had sued to block the acquisition based on concerns that WorldCom is attempting to gain interest in Digex through Intermedia without delivering fair market value.

Chandler noted that Digex shareholders may be entitled to "monetary remedies" that could reach as high as $2.5 billion. A trial date on the shareholder lawsuit over damages has been set for mid-May according to a Digex attorney.

Beaumont yesterday declined to react directly to the legal wrangling, but predicted that the acquisition would happen "some time in the first, second quarter of this year, depending on how things go from a legal standpoint. When we complete that transaction … we will have access to the premier high-end Web hosting provider in the business," he said.

If the deal falls apart it would impact, but not derail, WorldCom's Web hosting strategy, said Ronald McMurtrie, vice president of e-business for WorldCom.

"Digex is the premier provider of managed services. That's why WorldCom is acquiring Intermedia and that's why Digex will be a key component of the WorldCom worldwide hosting platform," he said.

WorldCom, he added, already sells Digex-hosted services. "We have agreements in place and service levels. They've deployed in our data centers today. We have commercial relationships that reach well beyond the transaction."