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Micron eyes Web services with NetLimited buy

The melding of PC makers and Web companies takes another step forward as Micron Electronics announces its plan to acquire the services firm.

The melding of PC makers and Web companies took another step forward today when Micron Electronics announced it planned to move into Web design and e-commerce services with the acquisition of NetLimited.

Direct PC maker Micron today said it has issued a letter of intent to acquire NetLimited, known publicly as Hostpro, which specializes in data hosting, Web site design, e-commerce application development, Web site hosting, and ISP connectivity services. Customers include Caesar's Palace, Tri-Mark Pictures, and California Federal Bank.

The deal represents the latest extension of a trend under which ISPs, PC companies, and even computer retailers are competing to become the single source for a customer's complete digital needs. PC companies, desperate for incremental revenue, have begun to sell, and even give away, ISP services as a way to boost machine sales. PC retailers and ISPs, meanwhile, have kicked off programs under which the hardware is given away free or at a substantial discount in exchange for long-term service contracts.

Either way, these alliances amount to the same thing for buyers: PCs and ISP services being acquired from the same source, typically with discounts.

With NetLimited, Micron--which has been hit hard by disappointing financial results this year--will be bringing ISP-PC packages to the business market, according to chief executive Joel Kocher. Moreover, the deal will expand the types of services being offered under these alliances, he said. Under most of the recent deals, PC makers have started to sell monthly connectivity services. By contrast, the new division will allow Micron to market higher-margin hosting and consulting services.

"It's all about connectivity. We all have to come to grips with the fact that the Web is rapidly transforming the PC business," said Kocher. "The PC business has reached the point of maturation where you can see it flip over into a services model."

Once the acquisition is complete, Micron will move to integrate NetLimited into Micron and offer the services through a single sales force.

"Our intent is to take that jewel and build it up using the Micron installed base as fuel," he said.

Although it may matter little to customers which market segments or companies drive the overall trend, it is a big issue for the companies involved. Naturally, Kocher stated that the PC makers, and more specifically the direct PC makers, are in the driver's seat. With hardware makers cutting their own ISP deals and creating ISP divisions, companies such as AOL lose opportunities to sign customers up.

Traditional PC makers, by contrast, and computer dealers will both end up competing over the services opportunity. Since direct PC makers do not have to worry about angering their dealer base, they can begin to market services without worrying about losing an avenue for hardware sales.

Micron and NetLimited started talking a little over a month ago, said Kocher. "They were looking at other roll-ups" with other PC companies, he said. "These guys have the secret sauce that makes it go."

The transaction remains subject to approval by Micron's board. Financial terms were not disclosed.