Switch and Data Inc., a national colocation provider renting power, space and interconnection capabilities to telecommunications companies, today announced it plans to acquire PAIX.net for $40 million.
PAIX, formally a part of Metromedia Fiber Network Inc., manages facilities where companies swap Internet traffic in six cities: Atlanta, Dallas, New York, Palo Alto, Calif., Seattle and Vienna, Va.
MFN, which is operating under bankruptcy court protection, has had PAIX up for sale since last year. In an interview last November, MFN chief executive John Gerdelman said the peering exchange was generating about $2 million per month, representing 10 percent of its monthly revenue.
PAIX represents a new business venture for Switch and Data, which has traditionally played the role of a telecom landlord across the country. PAIX facilities are hubs for swapping Internet traffic and monitoring associated network quality metrics, such as packet delays.
Switch and Data, based in Tampa, Fla., grows its customer base to nearly 420 companies, says CEO Patricia Higgins. There are more than 250 distinct networks located in the combined buildings, according to Switch and Data.
As part of the PAIX acquisition, executives let go 20 percent of the 200 employees working for either Switch and Data or PAIX. By last Friday executives notified all 160 employees who would be retaining a job, Higgins says.
The colocation sector has taken a non-stop beating ever since its customers started to go belly up in 2000. First the dot-coms folded, followed by a mountain of Web hosting companies and competitive phone providers among other communications companies.
Higgins, who joined Switch and Data in September 2000, says her company is faring better: Switch and Data is generating free cash flow and anticipates generating positive net income for the year off $70 million in revenue, the chief executive says.
Higgins says the PAIX acquisition supports its plan to introduce advanced services such as Internet peering. Furthermore, Switch and Data is acquiring space in three buildings where its own facilities are nearing full occupancy. Those buildings are located in Atlanta, New York and Seattle.
Switch and Data is evaluating markets where it might expand PAIX’s Internet peering capabilities, Higgins says. Two cities under consideration are Philadelphia and Miami.
The company also plans to follow through with a strategy PAIX was developing to link facilities. For example, Switch and Data plans to connect its San Jose, Calif., colocation facility with PAIX’s building in Palo Alto, in the second or third quarter, Higgins says.
