Just a couple of years ago, Costa Mesa-based Epoch Internet Inc. put off an initial public offering and laid off employees as competition and falling prices for Internet access and other basic Web services took their toll.
Now Epoch Internet is focusing on high-speed Internet access and building data processing centers.
The shift has attracted the interest of venture capitalists and heavy hitters such as IBM Corp. The company’s original investors, led by Providence Equity Partners and CIBC Oppenheimer, have agreed to put another $26 million into Epoch. This comes on top of $27 million recently announced from Tulsa, Okla.-based Williams Communications Inc.
“We’re looking to raise altogether about $70 million to $80 million,” said Brian McManus, vice president of business development for Epoch Internet.
McManus said Epoch plans to use the funding to build a national network of data centers,facilities full of servers and networking gear where companies contract out for the management of Web sites and other data services.
Epoch currently has data centers of 30,000 square feet each operating in Los Angeles and Costa Mesa and is building another one in Dallas. Within the next year, it plans to build four more data centers of 30,000 square feet each in Boston, New York, Chicago and Atlanta.
Epoch isn’t the only one building data processing centers. The thriving tech industry and the rush of old-line businesses seeking to modernize their operations have brought more than a dozen data centers to Irvine and other parts of Orange County in the past year. Santa Clara-based Exodus Communications Inc. and WorldCom Inc. are just two of the big players building data centers.
Companies have found it cheaper to outsource operations to data centers. The facilities house computers in highly secure cages that include climate control, backup power, high-speed data lines and constant monitoring.
The data centers are part of a new Epoch Internet, originally launched in 1994. In 1998, the old Epoch ran into heavy turbulence. Even though 1998 saw several outstanding IPOs, Epoch canceled its offering, saying it was facing unfavorable market conditions. Investor enthusiasm for Internet service providers such as Epoch had tapered off amid a glut of such companies.
The company went from 265 employees in 1998 to 170 employees by the end of the 1999.
Jeff Stone, former president of Nextlink Interactive, took over as chief executive in early 1999, replacing founder Scott Purcell. And the company moved its offices from Irvine to Costa Mesa.
At 270 people, Epoch is back above its 1998 employment level. The goal, McManus said, is to reach 330 workers.
Epoch’s focus had been on being an Internet service provider in the lower end of the dial-up market. While it still offers that service, its focus has shifted to providing high-speed access and Web hosting. Company executives declined to reveal its annual revenue.
In an effort to attract new business, one of its newest ventures is an incubator program in conjunction with IBM, Silicon Valley Bank, O’Melveny & Meyers LLP, Deloitte and Touche LLP and other business consulting firms.
In September, the program admitted 35 more startups for a total of 50 new companies. They include Intelligent Horizon, a firm founded by graduate students from the University of California, Irvine, who are building cost-effective data warehouse application services. Seventeen of the incubator’s companies are based in Orange County.
It’s not a traditional incubator in that these five firms are not getting stakes in the small companies, but rather are providing services such as hardware or consulting with the aim of building future clients. The five firms are aiming to unveil similar incubators in other parts of the country.
For its part, Epoch provides each startup with free high-speed Internet access and Web hosting for six months with the aim that these companies will pay for the services thereafter.
It’s also different than another incubator program recently announced that is being formed by entrepreneur Scott Blum in collaboration with IBM, Microsoft Corp. and Arthur Andersen. The new company, called Enfrastructure Inc. provides start-ups with everything from networks to dry cleaning services.
“What Enfrastructure is providing a ready made office environment,” said John Thomas, Epoch’s director of business development. “We don’t actually provide office space. We are the consulting arm.” n
