Wam!Net sells commercial business to increase focus on government market

Wam!Net Inc. of Eagan, Minn., a provider of digital content management and distribution services, sold its commercial business to Herndon, Va., Savvis Communications Corp., a managed IP services and managed hosting provider, Wam!Net officials announced this week.

The sale allows Wam!Net Inc. management to increase its focus on its Herndon, Va., wholly owned subsidiary, Wam!Net Government Services Inc., said Jay McCargo, vice president of business development for the subsidiary, which focuses solely on the government market. The subsidiary designs and manages secure enterprise networks for digital content distribution and hosting.

"With the additional funding to Wam!Net Inc., that's additional capital, and more time that the management can focus solely on the government business," McCargo said.

Under the deal, Savvis will acquire certain assets and customers of Wam!Net's commercial business. Savvis will pay $3 million at closing, and additional funds starting in the second quarter of 2004 based on revenue performance from the Wam!Net business at that time. The acquisition will result in infrastructure operating cost savings for Savvis, officials of the company said. Savvis said the combined firm would have annual revenue of about $275 million.

The deal is scheduled to close Aug. 1 for Wam!Net's U.S. commercial assets and on Wam!Net's European commercial assets soon after.

Wam!Net Government Services expects to double its revenues and increase its staff by about 200 people, to about 750 by year's end, in order to deliver on current government contracts and support new projects, company officials said. The company started with 20 employees in 2000.

Wam!Net Government Services is one of the largest subcontractors to Electronic Data Systems Corp., Plano, Texas, on the Navy-Marine Corps Intranet project. The firm also has contracts in the intelligence community, including a subcontract from Computer Sciences Corp. on the National Security Agency's Groundbreaker IT project.

Federal government spending on telecommunications products and services will increase at a compound annual growth rate of 7 percent, from $12.5 billion in fiscal 2003 to $17.3 billion in fiscal 2008, according to market research firm Input Inc. of Reston, Va.