Savvis reports earnings after the market close today, so it is time to quickly look at expectations for the quarter in light of Equinix’s nice results. Savvis has been hammered repeatedly over the past year, most recently in April when they reduced guidance substantially across the board. Frankly, they were guilty of some very rosy projections in February and they got punished for it.
About a third of Savvis’s business overlaps with that of Equinix - the colocation portion - and that sector is showing healthy growth. We should expect the same of Savvis. The next third of Savvis’s business is managed hosting, which is also a sector that is showing decent growth, albeit a bit slower than colocation. The final third is network services, and for Savvis this sector is flat to declining.
According to my model, in order to be in-line with guidance, revenues should look like this:
| Q4/07 | Q1/08 | Q2/08 | |
|---|---|---|---|
| Colocation | 62.3 | 67.9 | 72.0 |
| Managed Hosting | 59.5 | 61.3 | 63.8 |
| Network Services | 76.0 | 74.1 | 73.3 |
| Total | 197.8 | 203.3 | 208.8 |
Adjusted Ebitda should be in the range of $43-46M. It looks as if guidance is reasonable this time, so they had better meet it or exceed it if they want to regain trust. Investors will also be looking at the progress of their colocation buildouts. The new colo space is important to Savvis’s growth, its older facilities date from the boom and aren’t designed for the same power densities that the newer ones being built today.
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