Metromedia loses out in Microsoft deal

Metromedia Fibre Networks, a US technology firm, shed 11 jobs from its Dublin base yesterday following a decision by Microsoft to withdraw key business.

Microsoft has decided to host its ambitious dot.net project from a data centre belonging to Eircom, rather than with Metromedia, as previously announced.

The dot.net project will enable Microsoft to supply its customers with software over the internet by using powerful internet servers. It will form a crucial plank of Microsoft's new strategy to supply software as a service rather than as an "out of the box" product.

Metromedia, which opened a $75 million (€85 million) Irish internet data centre in September, will remain a partner of Microsoft's - but has lost the lucrative hosting contract. Mr Kevin Dillon, managing director of Microsoft's European operations centre, said the decision would better balance Microsoft's global risk. "There is a need for a solid platform as we move to software as a service," he said.

Microsoft has undertaken a full global risk assessment in light of the economic downturn and difficulties in the fibreoptics industry. One of its leading hosting partners, Exodus, recently declared bankruptcy - and it is expected Microsoft will seek to diversify its suppliers in high risk areas.

Microsoft already has significant global contracts with Metromedia, which hosts much of Microsoft's MSN service in the US. Metromedia only recently secured a funding lifeline after getting into severe financial difficulties during the summer.

Nr Noel Meaney, chief executive of Metromedia in the Republic, said it was a matter of "prudence" for Microsoft. He said Metromedia was refocusing its business on disaster recovery and mirroring, rather than the hosting business. He confirmed that 11 staff would lose their jobs at the Dublin office, which employs 45 people.

Microsoft's decision is bad news for Metromedia - but extremely good news for Eircom.

The contract to supply Microsoft software over the internet is a significant win for Eircom, which recently opened its £30 million (€38 million) internet data centre in Dublin. Microsoft will begin to implement its dot.net strategy next year and Eircom should gain millions of pounds in revenue as the volume of transactions increases.