Mar. 26, 2003 -- Switch and Data executives say last week's acquisition of PAIX.net is a key step in positioning the company for the long term. It's also paying some short-term dividends in the form of new business.
Switch and Data has signed five new customers since announcing the PAIX deal, according to CEO Patricia Higgins. Among them is Neopolitan Networks Inc., a provider of gigabit ethernet services.
The closing of the $40 million acquisition of PAIX from Metropolitan Fiber Networks makes Switch and Data a player in the market for peering and interconnection services. That's been a strategic goal for the Tampa-based company for some time, Higgins said.
"We clearly saw that at some point we needed an environment where customers can peer," said Higgins. "We saw that on our radar screen, and needed to decide whether we do that organically or through an acquisition."
Peering is a critical market niche in which the two most prominent providers, PAIX and Equinix, spent much of 2002 facing financial uncertainty. When MFN filed for bankruptcy and moved to sell PAIX, it provided an opportunity for Switch and Data.
"It met our plan, and we knew and liked the management team," said Higgins. "We found it especially important that both companies always held true to the neutrality position."
Tim Guarnieri, who served as general manger of PAIX, has continued with Switch and Data as vice president of business development. Guarnieri says that like the colocation industry, the peering marketplace is evolving rapidly.
"The peering landscape has gone through its own turmoil," said Guarnieri. "Through it all, the number of customer connections and switch ports has grown. The balance sheets have changed tremendously. The shape of the Internet is changing, and who connects to who is changing, but the growth has continued."
The acquisition of PAIX has changed the bottom line at Switch and Data, which acquired 225 customers representing $30 million in annual revenues (see Switch and Data's website for a detailed list of new customers). The company says it now has more than 400 customers, including Microsoft, UUnet, OnFiber, eBay, Deutsche Telekom, Verio, Cable & Wireless, SBC, ICG Telecom and Cogent. Higgins said 39 of those customers were common to both Swith and Data and PAIX.
Also acquired were six PAIX data centers in Atlanta, Dallas, New York, Palo Alto, Seattle, and Vienna, Va. The sites totaled 43,652 square feet of rentable space, giving Switch and Data a national footprint of 209,465 square feet in 33 sites nationwide.
Higgins said Switch and Data would maintain multiple sites in the three carrier hotel buildings where both companies had facilities, including 111 8th Avenue in New York, 56 Marietta in Atlanta, and the Westin Building in Seattle. A benefit is the PAIX facility at the Dallas Infomart, where Switch and Data previously had no presence.
Switch and Data said it will maintain the PAIX brand, and use its expertise to create regional peering exchanges in high-traffic Switch and Data facilities.
The post-merger company has 159 employees, including 47 former PAIX staffers.
"The great thing is that the integration is all done," said Higgins. "On day 1, employees weren't sitting around worrying about the 'me' issues, like whether they'd have a job. Some Switch and Data employee's are not with us anymore, and some PAIX employees are no longer with the company. But we wanted all the employees to be focused on looking ahead."
For PAIX, which started life in 1996 as Digital Equipment Corporation's Palo Alto Internet Exchange, the deal preserves a brand that Guarnieri believes has a bright future.
"The marketplace has always trusted PAIX," he said. "For our customers, what we do isn't a luxury. We've seen growth because the payback to the customer actually increases during difficult economic times."