EDS buys Loudcloud for $63.5 million

18 June 2002 IT services group Electronic Data Systems (EDS) has announced plans to acquire Loudcloud, the web-hosting business set-up by Netscape co-founder Marc Andreessen, for $63.5 million (€67.3m) in cash.

As part of the deal, Loudcloud said it will cut about 120 jobs, or almost a third of its staff, and will change its name and brand identity to Opsware. About 140 staff will join EDS when the sale is completed in September 2002. EDS will pay a further $52 million (€55.1m) over three years to license the ‘Opsware’ IT automation software.

The deal is filled with irony for Andreessen, Loudcloud’s chairman and largest shareholder with a 14% stake, who once said he hoped to transform the start-up into “the EDS of the Internet”.

It may also have been a humbling experience. Yesterday’s sale price represents a small fraction of the $306 million (€342.3m) that Andreessen and Loudcloud’s other founders have raised from investors since starting the company in September 1999.

That amount includes $150 million (€159m) raised in one of the few initial public offerings in the technology sector in 2001. The company has lost a total of $480 million (€504.7m) since its inception.

“It’s always tough to change,” Andreessen told the Associated Press news agency. “But if you are going to have a successful company, you have to adapt. You have to roll with the punches.”

EDS said the deal provides the foundation for “widespread automation of service delivery and applications management” – first within EDS’ managed hosting business, then over time throughout its global network of 14 data centres and 140 client-owned and regional data centres.

The consultancy said it will be able to “dramatically” reduce costs and improve efficiencies in the data centre environment by automating the complete lifecycle of managing business applications and the underlying infrastructure.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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