Colocation and hosting provider Savvis (news, filings) [a subsidiary of CenturyLink (NYSE:CTL, news, filings)] reported earnings this morning (it’s been a busy week) and it seems that fears of a difficult year have proven unfounded thus far. Revenues of $221.5M were down slightly sequentially overall, yet still better than I expected. EBITDA of $58.8M and earnings per share of $0.01 were positive surprises, and the company raised guidance for both EBITDA and free cash flow for the full year 2009.
The worry had been that while Savvis’s main colo and hosting businesses are in one of this recession’s stronger segments, their exposure to the financial industry and greater focus on managed services left them more vulnerable to churn. Indeed, revenues from the financial vertical were down 3% sequentially, but that is actually pretty good considering the state of the economy and the financial sector. Other verticals continued to perform well, although network services turned in its usual slow decline. That is not to say sales couldn’t have been better – sales cycles remain longer than normal – but they haven’t fallen off a cliff either.
Savvis also mentioned that they have won a big outsourcing deal with a ‘large, online digital media services company’ for some 10 Petabytes of storage. The deal, which will bring in over $40M over 5 years, seems quite substantial. Such managed services, whether of the cloud or SaaS or whatever, are where Savvis has long been pinning its hopes for the future. Their increasingly solid financial footing should allow them to focus more and more resources there.
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