Earnings season is ending, so let's have a quick summary of the how the companies that build and operate our internet/telecom infrastructure did.
TW Telecom (TWTC) powered through the quarter and achieved positive net income for the first time on the back of solid growth and increasing margins. Global Crossing shrugged off the economy and also boasted of solid growth and improving operations. Equinix (EQIX), Savvis (SVVS), and Switch & Data (SDXC) showed that the colocation sector remains red hot, if anything it is being fueled by the weak economy.
Who held position:
The titans of US telecom, AT&T and Verizon, both plodded through the quarter on wireless power but not overly encumbered by economic weaknesses. Sprint continued bailing water but didn't lose ground. Level 3 made fantastic progress operationally but did leave real revenue growth for the second half. XO managed to refinance its debt to Carl Icahn in a huge but expected dilutive event but showed a few glimmers of growth. Limelight had a solid quarter, apparently taking business from Akamai. CBeyond saw some effects of the economy, but nothing major.
Internap continued its fall from grace as reprecussions of their disastrous integration of the VitalStream CDN continued to reverberate. Paetec blamed poor growth on the economy, but reading between the lines of yesterday's earnings call and the rest of the sector suggests things are more complicated than simply that. Akamai also blamed the economy and internet traffic slowdowns for their weak showing, but it seems clear they are facing competition in an increasingly difficult sector. And of course Cogent saw pricing pressure and responded by raising the stakes with yet more pricing pressure, with a predictable effect on their second half projections.
- Colocation remains hot and seems likely to stay that way
- Telecoms with their own fiber seem insulated against the economy
- Stumbles seem to be situation-specific, if the economic tide is going out it is doing it slowly in this sector.
- The CDN sector is quite fluid right now, lots of jockeying for position.
Also, the media seems to be sniffing around the idea that 'traffic growth' is not a homogeneous concept, you can't read it off a meter someplace. You can't accurately count a metric that nobody has actually bothered to define peroperly. I wonder if they'll start to figure it out in the second half, more on that another day.
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