Melbourne IT merger musings

When I first heard the news about Melbourne IT merging with WebCentral, my immediate reaction was: "Well, that's lucky for Melbourne IT."

On the face of it, that might seem an odd viewpoint. Melbourne IT has annual revenues of $73.3 million and around 230,000 customers, making WebCentral a relative minnow with $58.4 million and 70,000 customers.

However, the domain name business, while providing a steady flow of income from re-registrations, doesn't have much in the way of growth potential (especially given ICANN's reluctance to approve additional top-level domains). Hosting services, on the other hand, offer constant possibilities in this area; few businesses two years ago would have thought they needed a blogging engine on their site, now many would view it as essential. The fact that WebCentral, with a third of Melbourne IT's customer base, has more than two-thirds of its revenue underscores the point.

Combined, the two firms will be in a better position to fight for larger enterprise accounts with major rival Hostworks. Any pitched battle for customers is likely to result in a price war, which in turn could help a few IT managers trim their never-expanding budgets. Definitely one to watch for if the deal gets the seal of approval in August.