Loudcloud passing on hosting business

Web infrastructure company Loudcloud said Monday it is exiting the Internet hosting business and will instead focus entirely on software.

Separately, Loudcloud announced it would change its name to Opsware.

Sunnyvale, Calif.-based Loudcloud is selling its managed hosting business to global services giant EDS for $63.5 million, the companies said Monday. The business, which has around 50 clients, should account for $75 million in revenue in 2002, Loudcloud said.

The deal also calls for EDS to license Loudcloud's Opsware IT automation software, paying $52 million over three years. Opsware, which helps companies manage servers and business applications, is the "foundation" of Loudcloud's managed services business.

Loudcloud is the brainchild of Marc Andreessen, who played a seminal role in the dot-com IPO boom in 1995, when as a 24-year-old wunderkind he helped take Netscape Communications public. But the second time around for Andreessen has been a little harder, with the weak economy forcing Loudcloud to swap a growth strategy for one that conserves cash.

Ben Horowitz will continue as CEO of the newly named company, and Andreessen will remain chairman.

Loudcloud has tweaked its business model before, as it sought a more stable financial foothold.

Gartner analyst Ted Chamberlin says since Loudcloud went public, the company's good products, ownership of assets and experienced, high-profile management team have made it an attractive acquisition target. see commentary

EDS, of Plano, Texas, said it expected to save as much as $100 million over the life of the Opsware deal by installing it throughout its global data center network.

"The deployment of Opsware is expected to dramatically reduce cost and improve efficiencies in the data center environment by automating the complete life cycle of managing business applications and the underlying infrastructure," the company said in a statement.

The deal, slated to close in September, is not expected to have an impact on EDS' bottom line. About 140 Loudcloud employees in California, Virginia, New York, and the United Kingdom will be transferred to EDS.