EIG buys IX Web Hosting for $28 million

EIG Buys IX Web Hosting for $28 Million

According to EIG’s 4th Quarter and Full Year Earnings Results, it was disclosed that at some time during the 4th Quarter 2015 EIG purchased IX Web Hosting for $28 million. The acquisition comes with approximately 72,000 subscribers. 

The latest acquisition comes hot on the heels of several others over the last couple of years, most notably Arvixe and Site5. The news will come as some concern for IX Web Hosting customers, especially considering the Arvixe debacle which saw significant complaints, poor service (2-week ticket responses), and lost data. While it remains to be seen what plans EIG has for IX Web Hosting, we suspect, like with other hosting companies they purchased, they will seek to consolidate the servers in their own data centers, and move support to India to reduce costs.

The new acquisition comes shortly after the acquisition of Email Marketing company, Constant Contact, which they completed the purchase for a reported $1.1 billion in February 2016.

EIG seems to prefer to keep its acquisition of hosting companies relatively quiet (unlike the Constant Contact announcement), with the news first breaking via the Financial Reports. The purchase of IX Web hosting is no exception, with the announcement as follows:

Full Year and Fourth Quarter Operating Highlights

The earnings results for EIG are surprisingly positive, considering some of the issues they were having with brands such as Arvixe. Their GAAP revenue increased 18 percent year on year, with a 12 percent increase for the 4th quarter compared to the same period a year ago. This increase in revenue seems to be driven by an increase in subscribers from new acquisitions, although it is unclear to the extent this new revenue is included in the increase in revenue:

“Total subscribers on platform were approximately 4.669 million, including approximately 72,000 subscribers from the IX Web Hosting acquisition completed during the fourth quarter. 

During the quarter, the company acquired the assets of Ecommerce, LLC (IX Web Hosting). The total consideration for this acquisition is approximately $28.0 million, of which $23.8 million was paid at closing.”

Regarding the IX Web Hosting acquisition, EIG appears to have paid a very substantial $388 per subscriber. This represents a considerable investment showing that a considerable sum was paid in respect of the branding, and ability to attract new subscribers in the future.

Should IX Web Hosting Customers be worried?

While we cannot be certain on the plans EIG has for IX Web Hosting, we know from experience that EIG likes to transfer the customers to their own servers and support systems to reduce costs. For Arvixe, Site5 and A Small Orange brands, existing management was retained for roughly a year before management responsibilities were transferred away from the previous owners. We suspect, therefore, that customers will not notice much of a different in the short term.

However, long term, once existing support staff are “let go”, and support moves to the more centralized team (we believe live-chat support is based in the US, with ticket support being located in India for many of their other brands) then some of the issues seen with Arvixe, or A Small Orange will creep in. Customers may, therefore, want to ensure they always have off-site backups, and keep their options open for the future.

We don’t want to cause too much alarm at present, as we do not know what plans EIG has for this new brand. But, based on previous acquisitions, we recommend caution.

We will be happy to see your thoughts

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