Savvis Strong In Q4, Yet Churn Looms

Savvis (news, filings) [a subsidiary of CenturyLink (NYSE:CTL, news, filings)] reported Q4 earnings this morning, and the verdict for the end of 2008 was pretty good. Revenues of $222.4M was above Yahoo’s estimates of $220.2, and up 2% from the third quarter. EBITDA of $52M was quite good, and positive earnings per share of $0.05 came as an unexpected bonus. As one might expect, Savvis’s good results came primarily from a big quarter of $83.2M in colocation revenues, up 6% sequentially and 33% over Q4/2007. Managed hosting was up slightly, and Network services down slightly – largely normal. In the fourth quarter, one could barely tell we are in a recession from Savvis’s numbers.

However, 2009 projections include a substantial dose of caution, with EBITDA of just $185-195M and positive free cash flow of $15-30M. The company decided not to give revenue guidance, and they expect that revenues of some $27M are at risk due to the NYSE Euronext’s purchase of the American Stock Exchange, a negative impact of some $12M from exchange rate volatility, and apparently $5M from churn in Chicago. Savvis has always been focused on the financial sector, and the chaos there probably means that they face greater churn than the industry average in this crisis. The consensus revenue estimate for 2009 was over $900M. Given the threat of churn and the lack of guidance, those estimates are surely going to drop.

It is looking as if we will see a similar pattern though throughout the internet infrastructure sector. Q4 wasn’t bad, but assumptions for 2009 will be necessarily weak. For colocation though, we won’t hear from Equinix (NASDAQ:EQIX, news, filings) and sdxc for a week or two yet.

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Categories: Datacenter · Financials