ORCS Web is not a publicly traded company, but I watch industry trends, including public stock prices, of competitors in the market as just one part of remaining market-aware.

So far, 2008 has not been a good year for public companies, especially hosting companies.

From January 2nd through October 17th 2007:

• The NASDAQ index is down 35.47%
• The S&P 500 index is down 35.95%
• Terremark is down 40.0% 
• Web.com is down 40.42%
• Equinox is down 43.89%
• Rackspace is down 50.84%
• Level 3 is down 54.92%
• SAVVIS is down 72.40%

What's going on there? Sure, the markets overall are pretty beaten up, but publicly traded hosting companies are consistently down more than the general market.

I think part of the issue is that many financial analysts don't understand the hosting market very well and have a hard time placing value on the various factors within the market and within the specific companies' operations. I believe that another factor, related to this same point, is that many of these companies have had extremely inflated - unrealistically so - price-to-earnings ratios and they needed to come down to more realistic levels.

Then there are some of the realities of this market's business environment. Data centers are costly to build. Data centers can be costly to maintain (upgrading equipment every few years as it ages). Power costs have increased quite a bit over the past few years. Cooling costs, translating back to both equipment and power costs, increase as server sizes decrease and rack space densities increase. Add in the fact that the cost of capital has increased over the past two years, and then dealing with these challenges becomes increasingly tricky.

Publicly traded companies in general often feel quite a bit of pressure to return short-term results. Many of today's investors tend to be very impatient (Warren Buffet excluded) and can drive stock prices down even further when short-term expectations aren't met. Lower stock prices then create a situation where raising capital for that company costs even more.

The hosting market overall is still rather strong and continuing to grow, and there are plenty of opportunities for expansion and increased market share for well run companies. It will be interesting to see how the management of the publicly traded companies deal with the balance of investor expectations and business realities.

By the way, ORCS Web is all about long-term relationships with our clients and if you need managed hosting - shared hosting, dedicated hosting, or even webfarm hosting - by Microsoft platform specialists (100% Windows OS), feel free to contact us to see how we can help your business succeed.