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Germany’s United Internet bought web hosting company Strato, owned by Deutsche Telekom. According to the reports in the press, United Internet paid for around €600 million ($629 million) in cash. It takes on 2 million customer contracts and approximately €130 million in annual revenue. This another step toward consolidation of the European web hosting market. The company already owns popular web hosting, domain registration and online service brands 1 & 1, FastHosts, InternetX, Sedo, Web.de, GMX, Mail.com, etc.

Ralph Dommermuth, Chief Executive of United Internet explained that the acquisition of Strato will make possible for his company to expand its position on the “European hosting and Cloud application business”. He also added that such deal “drives the consolidation of a market which is currently still strongly fragmented”.

The deal is backed by a private equity group Warburg Pincus, which values Strato at 12.4 times earnings before interest, tax, depreciation and amortization. According to experts this valuation is in line with the with the multiple that American web host Godaddy paid to acquire Host Europe Group (HEG).

United Internet has also been interested to buy HEG, but eventually switched to the Strato deal. According Reuters the equity group Warburg plans to inject additional €50 million into the business applications holding as part of the Strato deal. United Internet’s owns popular web hosting provider 1&1, which is among the biggest in Europe and within the last 5 years has significantly grown its business in the Unites States.

What Are Stato’s New Owner’s Expectations?

United Internet hopes that it will be able to attract small and medium German businesses to as clients by selling them various services – from websites, e-commerce solutions, CRM apps, security services and etc. The company is also looking forward to continue its web hosting acquisition business in order to consolidate the European It Hosting market and to.

Is European Web Hosting Industry Going The American Way?

More or less, “yes” as private equity firms and other type of investment ventures poor money to web hosting in order to increase “market consolidation”, which actually means to increase the market share for some big web hosting providers and to reduce the market significance of medium and small business IT hosting and Service providers. Investment funds and financial capital groups applies formula which multiplies the value of each business based on its size and customer base.

The bigger the entity is, the better chance financial groups have to launch IPO and to sell overestimated  shared on the stock exchange. Such approach to business proves to be profitable in a short run. However, when it comes to technology part of the business to the IT infrastructure services and Cloud service delivery, it possesses certain risk. It is all about decision making. After such acquisitions, the decisions are made by CTO’s and professionals who usually have a little to do with the management of IT businesses and processes. The investors and stockholders are always eager to return on their investments. As a result of that the companies increase pricing and the IT management is very often pushed to change the procedures and to impose restrictions and service terms which would make customers to increase their IT spendings.

In European Union, a single market on paper, that comprises of 28 national markets, 28 national languages and various business standards and cultures, it’s very costly and sometimes virtually impossible to apply common procedures and organizational standards which would create a successful universal IT service model. So it is very likely that any “consolidation” of the European web hosting industry to be just a short-lived and unsuccessful attempt to apply the American business practices into the European business environment.

The United Internet’s website does not differentiate from the finest traditions of corporate culture – to produce self-sufficient structures which are focused mostly on bragging about their own success. “With its clear focus on the growth markets internet access and cloud computing, United Internet is ideally placed to benefit from the expected market growth”, says the company’s website.

We are going to WebhostingDay, next week so I decided to send an email to Kirsten Nothbaum of PlusServer, one of the organizers of the show.  According to the German hosts of the conference, this year participants can expect to see about 50 well-known companies as exhibitors. “People will be able to listen to interesting talks and learn many new things which currently affect the industry”, said Kirsten. Here is the whole interview.

Hi Kirsten, good to meet you. How much time does it take to organize an event like WebHostingday? Is it a huge effort?

Hi Dimitar. Yes, it definitely is. Actually, we already started shortly after the last WebhostingDay to make plans for the next one, and about mid 2008 we began with gaining partners and preparing all necessary information for them. At the same time we started to draw the attention of potential visitors to the event. Considering that we organize everything alongside our core business (Intergenia AG) is a supplier of professional web hosting and server solutions), we can be proud of what we accomplished so far.

Please explain for those that never heard of WHD… What is WebhostingDay – more are trade show or an event where anyone can come to share knowledge and to learn something about the hosting industry trends?

Web Hosting Day is both: a gathering for the international web hosting industry including a hosting trade fair with about 50 well-known companies as exhibitors. People can listen to interesting talks and learn many new things which currently affect the industry. And during the exciting social events, the attendees can form and maintain relationships with colleagues from the hosting sector.

… you’ve been organizing WHD for the fifth consecutive year. Which one the the last four was the best?

This is hard to say. Every year had its own special challenges and it was always a success to gain more partners and visitors from year to year. This was partially possible because of the good impression the event made on the former partners and visitors, who told other people about it, who then registered in the next year.

Why a comercial provider like Integenia AG decided to organize a industry show. Isn’t it waste of time for you guys. You would make more money if you are focused in producing and selling web hosting services only.

Well, you may call us enthusiasts if you like. We do not organize the show for the sake of making money. It is our intention to bring together the brightest minds of the industry for the benefit of all web hosting professionals, so that they can exchange about experiences, news, challenges and solutions. You see, it is crucial for our sector to interact and network with other companies, and WebhostingDay gives an ideal opportunity for it.

Do you have a funny story from any of the last events to tell?

Sorry, I cannot think of one at the moment.

OK. WHD will pay attention to cloud computing, as any other con that takes place in 2009. Do you expect a cloud hosting software producers to present their platforms during the show?

Yes, we have many experts and early adopters of cloud computing coming together at the CloudCamp, which takes place on March 19 parallel to WebhostingDay. Moreover, there will be some interesting talks dealing with the topic of cloud computing. For example, Serguei Belloussov, CEO of Parallels, will help to clear the foggy realm of cloud computing for service providers and businesses.

Let me ask you another question… Is it now time for web host and data storage providers to invest in new cloud generation (cluster and grid hosting) platforms? And don’t you think that the economic slowdown would make businesses cautious about new technology investments?

That question will certainly be discussed during WebhostingDay within the scope of the main.FORUM or CloudCamp. Companies, who are currently wondering about investing or not, should come and get some answers from the experts.

I’ve been on Parallels Summit in Vegas and the company’s CEO Serguei Bellousov gave a very interesting speech about the perspectives in IT market and web hosting in particular. What do you expect him to talk about at WHT?

He will talk about “The Next Generation of Optimized Computing”, focussing on cloud computing and how businesses can take advantage of it.

Which day of WHD do you expect to be the most interesting one? What does anyone must not miss?

Both days are fully packed with talks and sessions about different topics, so it is difficult to say which one to prefer. If somebody only wants to come for one day (which for the stated reason we cannot recommend), it depends on the attendee’s main focus of interest which day would suit him best. People should not miss the opportunity, however, to join the great ConneXion party on March 19 in the evening, where everybody comes together to celebrate and have fun.

I’ve seen there are some promising social events! A very important question about them. Do you offer, or at least is there around a something like “You drink, we drive” service ;) I’m asking you this on behalf those who missed to book a hotel, next to the event… like me :) … and will need a drive from Cologne to come to the conference…

We offered a shuttle service to Cologne last year, but for whatever reason it was not made use of so much by the attendees. Therefore, we do not offer something similar this time, and people will have to take taxis (or if they prefer, public transport in the mornings) if they want to go to Cologne and back.

And finally one serious question. There are many people who are coming to the event from overseas. What do they have to see in Cologne, besides the Cathedral. Are there any sightseens, which people should go to see?

They have to visit one of the famous brewpubs, of course, where the traditional Cologne beer called Koelsch is served. Additionally, typical Cologne specialities can be eaten there. And, for instance, they may want to visit the parent house of 4711, the famous Eau de Cologne. It is a beautiful old building and souvenirs for the family can be bought there.

One of the well-recognized U.S. dedicated hosting providers The Planet announced that it plans to go overseas and to open its first data center in Europe. This would be the first data center operation of the company outside North America. the company claims to face an increasing demands for an international, globally redundant hosted infrastructure. The Planet says its new facility will be build in London area.

”For the past 18 months, we’ve evaluated international markets that are of strategic importance to our planned global expansion, and Europe has been at the forefront of those discussions. We’ve had serious customer interest, which underscored that the time was right to move forward”, said Douglas J. Erwin, Chairman and Chief Executive Officer at The Planet.

The dedicated hosting provider plans to start offering its proprietary virtual racks solution on UK and EU market in April. The Planet will offer 20kW of power per rack, backed by N+1 redundancy on generators, transformers and UPS systems. According to hosting provider, its new customers will have access to a 10GB private fiber interconnect to The Planet’s core network, as well as local connectivity to Tier-1 providers and the major EU peering exchanges.

The company has begun building its London based data center two years ago. Recently it added some peering points on the East and West Coasts of the United States. The Planet says that their storage cloud and CDN (Content Delivery Network) products also provide global access points. 42% of the provider’s customers are coming from outside U.S.

The Planet has signed a colocation agreement with TelecityGroup, a company that maintains 20 data centers in 7 EU countries. The web host announced that the procedures in its new facility comply with ISO 9001:2000, a standard that defines requirements for the quality management systems for data center operations.

At the need of the 2009 The Planet said it planed to open its 7th data center in Dallas, a 86,000 square foot collocation facility in Dallas. It is expected to be opened in May 2009.