Melbourne IT is an Australian Internet company listed on the Australian Securities Exchange (ASX: MLB). Formed in 1996, its primary business is domain name registration in most of the major national and global top-level domains. It also offers web and email hosting services and online marketing services.
The company is a profit-earning medium-sized (in the Australian context) Internet business, with 2004 earnings of approximately 4.5 million AUD (EBIT) on revenues of about 60 million AUD, and continues to grow steadily. It has operations in several European countries through the acquisition of Cogent,[1] as well as IDR Management Services,[2] based in London. Melbourne IT currently operates eighteen main global offices, including an office in the Washington, DC area and Mountain View, California.[3]
For historical reasons (outlined below) Melbourne IT had a de facto monopoly on com.au domain name registrations for several years, providing more than half of its revenues until April 1999 when ICANN awarded it one of the first five registrar licenses to compete with Network Solutions Inc in registering domain names under .com, .net and .org.[4] From December 1999, when Melbourne IT listed on the ASX, the registration of international domain names has dominated its revenues. Internationally, as an ICANN-accredited registrar, Melbourne IT is ranked around 5 in the world, making the company the largest Australian domain name registrar.[5]
The company has attempted to diversify its revenue sources to reduce its dependence on domain names, introducing managed hosting products and consulting services. In 2006, Melbourne IT acquired WebCentral, Australia's largest web hosting company. In 2008, Melbourne IT acquired Verisign DBMS for US$50m.[6]
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Melbourne IT's history dates back to April 1996 when Eugene Falk AM OBE and Professor Peter Gerrand [7] were appointed as Chairman and CEO, respectively, for the University of Melbourne’s new commercial subsidiary Melbourne Information Technology International Pty Ltd, which commenced operations from 1 May 1996. Professor Iain Morrison[8] was appointed the third foundation director of the company. The company chose to trade under the business name of Melbourne IT from its earliest days.
Contrary to popular mythology, the company was not set up to trade in domain names. The company’s charter was to demonstrate the University’s strategic leadership in working with industry and government in selected areas of IT. Its first and continuingly profitable business, up until its float on the ASX in December 1999, was its joint venture ASAC (Advanced Services Applications Centre) with Ericsson Australia. ASAC was set up to develop applications with synergies between the Internet and advanced telecommunications, particularly mobile products. ASAC was recognized by Ericsson as one of its Global Design Centres in 1997, and contributed $0.5 million dollars in profit to Melbourne IT in the year before its float. ASAC was incorporated as an independent joint venture in December 2000, but became a casualty of Ericsson’s downsizing of its global R&D following the bursting of the Dot-com bubble in July 2000. On 21 June 1996 a front-page article in the The Australian Financial Review by Charles Wright drew attention to the parlous state of commercial domain name registration in Australia, where a large backlog of Australian businesses were waiting for processing of their applications for com.au domain names by the part-time domain name administrator, Robert Elz, senior system administrator in the University of Melbourne’s Computer Science Department, who declined to communicate with the media.
Robert Elz had been assigned the role of administrator of the .au top-level domain by Jon Postel since 1989, an arrangement that worked quite satisfactorily through the early 1990s when the Internet was largely of interest only to tertiary educational and research institutions. The AFR article caused Melbourne University to be aware of the possible commercial value of the rights to assign domain names, but also of the damage to the University’s reputation if the registration of com.au domain names was not transferred to a competent commercial organization. The Head of the Computer Science Department persuaded Mr Elz to transfer the administration of com.au names to the University’s subsidiary Melbourne IT, which he did by way of a non-exclusive licence, to be reviewed after five years. Melbourne IT was awarded a grant of $100,000 by the Government of Victoria in 1996 in return for registering the backlog of over 2,000 com.au applications free to the applicants, and used this money to build its first domain name registration software platform.
From October 1996 Melbourne IT began pricing its services by charging for new and renewed com.au names at 10% below the market rate set by Network Solutions for the popular .com names, and was the first domain name registrar worldwide to introduce trademark checking and money-back service assurance guarantees.[4] It also introduced three-tiered pricing for different levels of turnaround time, during the first two years 1997-98 before eligibility decisions were sped up by online access to the Australian trademarks database and to registries of Australian business names and gazetted geographical names. Melbourne IT also moved to align Robert Elz’s rather idiosyncratic eligibility criteria (e.g., ‘no name should in principle be registered if found in an English dictionary’; but exceptions had been made to this before 1996 such as news.com.au and travel.com.au, which annoyed other applicants) to the rules for registering business names in Australia.
In April 1999 Melbourne IT was selected by ICANN to be one for the first five registrars to register .com, .net and .org names in competition with the incumbent Network Solutions. Entry into the international domain name market from July 1999 greatly increased the company’s revenues and market value, and caused the University to prepare the company for an Initial Public Offering. On 14 December 1999 Melbourne IT was floated on the ASX, near the height of the dot-com bubble.
It benefited from a cover story by finance journalist Ivor Rees in a weekend edition of the Australian Financial Review in November 1999, describing it presciently as the ‘Hottest Float of the Year’. Interest in the shares was particularly strong because it was the only Australian tech stock floating that year with a track record of actual profitability. Demands for a prospectus were so high that complaints were aired in the media by members of the public unable to obtain one. The chief beneficiaries of the float, apart from the University, were the clients of the underwriters, JB Were and CommSec, some of whom made massive stag profits when the stock peaked at $8.20 on the day of its float, compared with the IPO price of $2.20. In 2000 the Victorian Auditor-General held an investigation into whether the stock was undervalued by the underwriters when listed, but concluded that the float had been carried out properly.[9]
The University of Melbourne received a gross benefit of $93.5 million through selling 85% of its equity in the float, as well as a pre-float dividend of $1 million, but left the company with $7.5 million as working capital. The stock held up above $8 for four months following the dot-com bubble of April 2000, peaking briefly to $17 in February, but sank to $5.99 after the company released a realistic market outlook on 23 August 2000.
During January to August 2000 the founding CEO Peter Gerrand founded subsidiaries in the USA and Europe [1], and participated in the creation of auDA as the national domain name industry self-regulator. On 14 September he announced he would leave the company on September 30 for family reasons;[10] after this announcement the stock sank by a further 10%. He was succeeded by his deputy Adrian Kloeden [2], and continued as a consultant to the company until after the hosting of ICANN’s meeting in Melbourne in March 2001. Adrian Kloeden was succeeded as CEO by Theo Hnarakis in November 2002 [3].
In September 2006, Melbourne IT acquired the Australian Internet hosting company, WebCentral Group (ASX:WCG) via a scheme of arrangement and delisted the WebCentral group from the ASX. Founded in 1997, WCG have 2 data centres in Brisbane, one at Wickham Street, Fortitude Valley, and another in Spring Hill at a PIPE Networks facility. Staff from Webcentral's Brisbane office also manage a large colocation area in an Equinix datacenter in Mascot, New South Wales.
Dr Bruce Tonkin [4], who joined Melbourne IT in 1999 as Chief Technology Officer, was elected convenor of ICANN’s important GNSO (Generic Names Support Organization)[5] constituency from June 2004 to June 2007, and will serve on the ICANN Boards as the GNSO’s elected representative from May 2008.
On 30 April 2008 Melbourne IT announced it is going to purchase VeriSign's Digital Brand Management Services for US$50m.[11]
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