PSINet Moves Into Services Business With Metamor Acquisition

PSINet Inc. today disclosed plans to acquire Metamor Worldwide Inc., a provider of E-commerce software and services, in a move that pits the Internet service provider squarely against other service providers, including Qwest Cyber.Solutions Inc.

The $1.9 billion stock deal, expected to be complete by year's end, gives PSINet, an E-business services group, custom applications development functionality, as well as application and network integration expertise.

To date, PSINet's strength has been in infrastructure and hosting services. Analysts say the deal gives the company the potential to become a prominent provider of applications. "PSINet could become a true ASP with hosting facilities, applications, and services," says William Klein, equity analyst for Wasserstein Perella Securities in New York.

Network service providers may also get a run for their money. According to Klein, the combined entity will give PSINet "more customers, salespeople, and solutions than Exodus, Concentric, or Digex."

The merger gives PSINet (PSIX-Nasdaq) a controlling interest in Metamor's E-business solutions subsidiary, Xpedior Inc. (XPDR-Nasdaq). Xpedior provides Web-application development, hosting, and integration to global companies, government, and dot-com businesses. Xpedior has about 1,300 employees.

According to the merger agreement, each share of Metamor will be exchanged for 0.9 shares of PSINet stock. PSINet's stock was down 7-9/16 to 44-7/32 in early-afternoon trading. Metamor's (MMWW--Nasdaq) stock jumped 17-15/16 to 33-15/16 and Xpedior's stock climbed more than 50%, or 7-5/6, to 21-7/8.