Telecom Ramblings

Cogent Communications (CCOI: chart, news) followed up on its great second quarter with a very respectable third quarter earnings report.  Revenues of $60.2M were up 3.9% sequentially – they were up 5% last quarter.  EBITDA was $17.0M, up 2% from the prior quarter, and the loss per share was $0.07.  Analysts were expecting a bit better on the revenue side, and a bit worse on the earnings side.   Last quarter Cogent stopped giving forward guidance, so this was the first quarter the street had to make their guesses blind.  The company was one of the first in the sector to feel the effects of the economic downturn, although some of their issues at the time were self inflicted via price cuts as the competition closed in on their long-held $10/mbps line in the sand.  They seem to have gotten past that.

Operationally, the company continued to add new on-net buildings at their usual steady pace, chalking up 32 more during the quarter for a total of 1421.  And on the bandwidth front, they saw a nice 15% growth rate sequentially, which is pretty good considering that the third quarter is not seasonally strong for IP transit.  One interesting note is that the company finished the quarter with 569 employees, jumping 6% in just a quarter.  Clearly they aren’t living in fear of the future at the moment.  I wonder if that was mostly in sales or in operations, they will probably comment on the call shortly. [Update: in the CC they said +20 sales.]

I’m a bit curious about Cogent’s next move, they’ve been awful quiet lately.  With their datacenter footprint and large backbone, they would seem to be a natural for some sort of move on the CDN market.  Surely CEO Schaeffer sees that IP transit alone isn’t going to win the race, he’s a smart guy.  But he also likes to shop at garage sales, so I wonder if there are any CDNs looking for someone to hand the keys to and walk away.  Of course, their enterprise business continues to stride forward, perhaps he’ll just keep riding it.