ARN: What work has Commander started in preparation for its move into the Web hosting market?Gingell: We are about a month into the offering. The WebCentral wholesale product needed to be heavily customised so it took quite a while to redevelop the services for our customers' needs. A direct sales force has been trained for the Web hosting services and the telemarketing is all set up for a larger launch this month, including direct marketing into our customer base.
Where does Commander position itself in the hosting market?I see four tiers in the hosting arena. Firstly there are the big, refrigerated warehouses connected to the network backbone for the enterprises. Then there are the fully serviced managed hosting services with dedicated servers. We work at the next level, shared server Web hosting, for those that need additional services like domain registration rather than the bottom tier, small template-driven sites with no room for customisation.
How big a role is data services going to take on, considering you are traditionally a telephony-focused business?Around 15 per cent of our current business comes from data services, but we aim to build the data business to the same size as the voice business within a few years. We already have a number of data-related services aside from Web hosting.
We have Web design and integration assets from two businesses we acquired prior to listing last year and can provide a fully managed IT environment for middle market companies on-site. A fringe benefit of this whole project is developing an integrated billing system for both voice and data. The aim here is not to sell the Web hosting in isolation, but as part of a bundle of services. This puts us in a slightly different space to the rest of the market. With our recognisable brand and large customer base, we expect to hold 10 per cent of the Web hosting market by the end of the financial year.
Who are your main competitors in the hosting space? Our research indicates that customers can't think of a company that can satisfy both their voice and data needs off the top of their heads. And no one has got any great returns out of these services yet, so the window for funding such a business is just about closed. With our existing cashflow, we are able to make the necessary incremental investment without the pain. There are very few extra overheads for us - we don't have to spend money on branding - so any activity is done at a marginal cost with a fast return on investment. It's about creating an annuity business, a stable relationship with our customers.
What criteria did you put in place when deciding on the wholesale partner for these Web hosting services?We had to be able to put our own brand on it and continue to manage our customers. It also had to be here and now, not a service that would be delivered over a period of time. Finally, it had to have the right mix of features our customers would prefer. We also had to be confident they will be around in the long-term, and we think WebCentral will be.
How has Commander performed on the ASX since listing in December?We launched at a pretty bad time. In December we began at $0.95 per share and we're now around the $0.70 mark. But we are beating the telcos index, which has dropped dramatically. I think we have a lower volatility than most stocks because we have an underlying cashflow. As for our financial performance, initial results suggest we are 14 per cent ahead of the prospectus forecasts on profits and slightly above on revenues.