Colocation Helps Internap's Advance

November 8th, 2008 by · Leave a Comment

Internet solutions provider Internap(INAP) reported earnings Thursday after the market closed, showing a few signs of life again after a weak Q2 showing and an horrible 2008 so far. Revenues of were higher than generally expected, and adjusted ebitda and earnings were similarly strong:

Q1/08 Q2/08 Q3/08
IP $31.1M $30.4M $31.7M
Colo $25.2M $26.5M $28.7M
CDN $5.7M $5.4M $5.0M
Total revenue $62.3M $62.1M $65.4M
adj EBITDA $9.6M $5.5M $10.0M
adj EPS -0.05 -0.02 0.06

Of course, those figures do not include the company's $100M goodwill writeoff due to the impairment of the CDN business.

Looking deeper we see that it was colocation (what else?) that gave Internap its mojo this quarter, with IP revenues holding up reasonably well also. But CDN revenues of $5M were disappointing, although perhaps expected by most. The company has clearly been trying to kickstart this segment, but hasn't gotten anywhere at all yet.

What next for Internap in this difficult economy? Colocation is likely to remain the only reliable engine for growth, and the new facility coming online in Q4 will help going into next year. IP transit pricing shifts from Cogent at the low end do filter up to Internap's boutique pricing as well, so there is a headwind in that segment. And the economy is likely to slow any revival in Internap's CDN segment due to their customer mix.

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Categories: Content Distribution · Datacenter · Financials

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