Hewlett-Packard Invests $50 Million in Data Hosting Venture
By Cindy Christ

Hewlett-Packard will invest up to $50 million in Primus Telecommunications to help the global carrier build Internet data centers around the world.

Data centers are huge warehouses holding computers and telecommunications equipment that run Internet and corporate intranet sites.

HP is making the investment using five-year, interest bearing notes convertible to Primus stock once certain strike prices are met.

The multimillion-dollar investment jumpstarts Primus's move into the nascent data hosting market.

Most of the funds are targeted to expand data centers in Western Europe, Australia, Japan, Brazil and other regions of the world.

The first of the 10,000-square-foot-centers is expected to be up and running in the United Kingdom by June, with four more planned for construction this year in Europe, Australia and Canada.

The pact comes just two days after IBM, the world's largest computer maker, and broadband carrier Qwest Communications unveiled an alliance to build 28 new Internet data centers in the U.S. to gain a bigger share of the booming Web hosting market.

"We are very excited to have the tremendous strength and backing of HP to support Primus as we complete the deployment of our global broadband network optimized for e-commerce, Web -hosting, and advanced Internet, data and IP applications," said Primus chairman and CEO K. Paul Singh.

Founded in 1994, McLean, Va.-based Primus offers voice and bundled Internet, e-commerce, data, Web hosting, virtual private network and other services.

The company operates a global network of telecommunications facilities, including 23 undersea fiber optic cable systems, 19 international and domestic switches, and a satellite earth station, in addition to providing Internet service through its iPrimus.com portal.

Hewlett-Packard also will provide its Commerce for the Millennium electronic commerce software for Primus's data center customers starting in the UK and Australia.

Designed for small- and mid-sized businesses, Commerce for the Millennium provides a packaged system to launch digital commerce sites quickly and easily.

"With its secure broadband network, established distribution channels and more than two million customers in the world's major markets, Primus is an ideal partner for HP," said Craig White, president of HP Credit Corp.

Shares in Primus (PRTL) got a boost from the news, rising $4.81, or 11.3 percent, to $47.50. Hewlett-Packard (HWP) slid $6.81, or 4.8 percent, to $133.88 amid a tech sell-off on the Nasdaq.

Primus jumped 9 percent Tuesday after Morgan Stanley Dean Witter reiterated its "strong buy" rating and set a 12-month price target of $81, noting strong growth prospects for its iPrimus division.

"The unit is expected to maintain 100 percent compounded annual growth over the next several years, which should accelerate the consolidated top-line run rate," analyst Paul Saferstein said in a research note.

Saferstein also said that Primus's relationships with Digital Subscriber Line providers Covad (COVD) and Northpoint Communications (NPNT) put it in the same field with companies like Equant (ENT), PSINet (PSIX) and Digital Island (ISLD).