Interliant Undertakes Restructuring to Focus on Select ASP Offerings; Company Reduces Earnings Outlook for First Quarter 2001

Business Wire, April 2, 2001

Business Editors/Hi-Tech Writers

PURCHASE, N.Y.--(BUSINESS WIRE)--April 2, 2001

Interliant, Inc. (NASDAQ:INIT), a leading global application services provider (ASP), today announced that it is undertaking a restructuring of its business to focus on select solution offerings in which the Company believes it has a competitive advantage. In conjunction, the Company also announced that, in the foreseeable future, it will not make future investments in solutions that fall outside of its narrowed focus.

"During the first quarter of 2001, the economy slowed to a far greater extent and more rapidly than we had anticipated at the time we reported fourth quarter 2000 results," said Herb Hribar, Interliant president and CEO. "In addition, the rate of adoption for the ASP model is lower than we expected. Given these factors, and after carefully reevaluating our business plan for the year, we concluded that it is critical for us to direct our energies and resources to those offerings that give us the greatest opportunity for growth and return on investment."

Five Key Areas

Interliant's new business focus will include the areas in which it expects to realize sales momentum and demand for services. These areas are: Managed Messaging (on both the Lotus Domino and Microsoft Exchange platforms), Managed Hosting, OEM (private label) Web hosting, Managed Security services, and Professional Services.

"We believe we have a competitive presence and an opportunity to claim a leadership position in each of these areas," Hribar said. "These also are our highest-demand offerings, and prior investments in infrastructure and personnel should enable us to take them to the next level. We anticipate that our concentrated focus also will enable us to direct additional resources to these areas and, therefore, to deliver considerable benefit to our existing customers. We remain fully committed to the services we provide our customers."

Restructuring Activities

The Company will not make further investments in hosting for the following solutions that lie outside its narrowed focus: enterprise resource planning (ERP), including Human Resources and Financial solutions; customer relationship management (CRM); and e-commerce hosting solutions. The Company also is exploring the disposition of certain assets and business units outside its narrowed solution focus. The Company will, however, continue to service existing customers in these areas until the time of such disposition.

In connection with the restructuring, the Company will eliminate approximately 190 positions, or 14 percent of its workforce, immediately. The Company expects that this workforce reduction will result in a charge in the range of approximately $3 to $4 million in the Second Quarter of 2001. There also will be additional material write-offs or charges in connection with the events described in this press release that will affect the Second Quarter of 2001 and other periods.

Lowered First Quarter Guidance

Interliant also announced that it expects its revenues for the First Quarter of 2001 to be in the range of $37 million, which is lower than for the Fourth Quarter of 2000 and below its previous guidance of $44 to $46 million. Due to the change in the focus of its business model and reduced visibility, Interliant is not able to provide guidance for the balance of fiscal year 2001 at this time. However, the Company has experienced a decline in new revenue bookings in the First Quarter of 2001. The Company plans to announce financial results for the First Quarter on May 3, 2001, before the market opens.

Form 10-K Extension Request Filed

The Company has not fully assessed all of the implications of the restructuring actions that it is taking or contemplating. For these reasons, the Company has requested a 15-day extension for filing the Company's Form 10-K for 2000 with the Securities and Exchange Commission.

Equity Financing

In light of the lowered First Quarter results, the reduced visibility to the balance of 2001, and the restructuring described above, the $20 million equity financing from an affiliate of Charterhouse Group International, Inc., has not been consummated. There can be no assurances that the Company will complete any future financings.

Conference Call

Interliant anticipates that it will host a conference call immediately following the filing of its Form 10-K for 2000. Details of that call will be published once it has been scheduled.

About Interliant

Interliant, Inc. (Nasdaq:INIT) is a leading global application service provider (ASP) and pioneer in the ASP market.

Interliant's INIT Solutions Suite includes managed messaging, managed hosting, security, OEM Web hosting, and professional services. Interliant, headquartered in Purchase, NY, has forged strategic alliances with the world's leading software, networking and hardware manufacturers including Microsoft (Nasdaq:MSFT), Dell Computer Corporation (Nasdaq:DELL), Oracle Corporation (Nasdaq:ORCL), Verisign/Network Solutions (Nasdaq:VRSN), IBM (NYSE:IBM), Sun Microsystems Inc. (Nasdaq:SUNW), and Lotus Development Corp. For more information about Interliant, visit www.interliant.com.