NaviSite: 'Teetering on the Edge'

By Baselinemag  |  Posted 2005-01-13 Print this article Print

NaviSite's sickly finances unnerve some; others believe the company remains among the best in the high-end hosting business.

NaviSite has bought five Web and application hosting providers in the past two years, even though the company itself has been struggling to make ends meet. And not everyone's happy with the new owners.

In 2000, the Johns Hopkins University School of Medicine contracted with AppliedTheory, an application hosting company, to develop a Web site on infectious diseases. That company was bought by ClearBlue Technologies, which NaviSite acquired in late 2002. Laura Marcial, director of technology and operations for the project at Johns Hopkins, says she's concerned about NaviSite's viability and is looking for a different hosting arrangement. "Overall, it's been troubling to go from AppliedTheory to ClearBlue to NaviSite and see them all teetering on the edge of bankruptcy," Marcial says. View the PDF -- Turn off pop-up blockers!

Other customers also seem spooked. In 2002, the American Society for Training and Development (ASTD) outsourced Web site development and management to Interliant, which NaviSite bought in 2003 after Interliant filed for bankruptcy. Now, ASTD is "in the process of evaluating its options for hosting," says spokeswoman Jennifer Homer, declining to provide additional details.

NaviSite CEO Arthur Becker realizes customers are worried. "A lot of our customers have gone through trauma in the last few years as their providers have gone bankrupt," he says. But Becker points out that NaviSite has taken steps, including laying off 100 employees since June 2004 (head count is now 480), to put itself in a position to turn the corner.

Despite the turmoil, some still think NaviSite is among the best in the business. Phil Mazarakis, director of information technology at marketing-services company Student Advantage, says NaviSite is "the Cadillac of hosting services ... Their service and expertise are excellent and in-depth, despite the cuts they've had in staffing."

And sometimes, NaviSite is the only game in town for high-end Internet hosting. Jeff Berezin, chief technical officer at online health information site eMedicine.com, moved the company's Web servers to NaviSite's data center in Syracuse, N.Y., two years ago because it had the fastest Internet connections in the area. "Our traffic has been doubling every year for the past eight years, and NaviSite has the bandwidth to keep up," he says.

Berezin, however, is concerned that customers have been moving gear out of the NaviSite facility: "This data center is thinning out a little, and I hope it doesn't get shut down."

Web Hosting

400 Minuteman Rd.,
Andover, MA 01810
(978) 688-8100


Employees: 480

Arthur Becker
Named CEO in February 2003. He's a co-founder of Atlantic Investors, an investment firm that owns 61% of NaviSite.

Sumeet Sabharwal
VP, Global Delivery
Responsible for building and managing operations. Previously in charge of operations at Intrasphere Technologies, a software development company, and before that headed India operations for technology consulting company Sapient.

A-Services include application management, Web hosting and development. M-Services provide hosted e-mail and collaboration packages.

Reference Checks

Jeff Berezin
(315) 413-0661
Project: Online health information company runs 27 Windows servers at NaviSite's data center facility in Syracuse, N.Y.

Burton Snowboards
Brad Alan
Internet Project and Development Manager
(802) 862-4500
Project: NaviSite manages 30 different Web sites—including those for Burton's partners—for the snowboard maker in Burlington, Vt.

EMI Industries
Dave Hahmann
VP, Sales and Marketing
(813) 626-3166
Project: Tampa, Fla.-based maker of food-service equipment originally hosted its Siebel Systems customer relationship management system with Surebridge, an application service provider NaviSite bought in 2004.

Johns Hopkins University School of Medicine
Laura Marcial
Dir., Technology and Operations
Project: NaviSite hosts the school's infectious-diseases guide Web site, which has 250,000 registered users.

Houston Symphony
Philip Gulla
Mgr., I.T.
Project: NaviSite has hosted the symphony's Lotus Notes e-mail servers for the past four years.

Student Advantage
Phil Mazarakis
Dir., I.T.
Project: University-oriented marketing services firm based in Boston hosts 20 servers with a 3-megabit-per-second Internet connection at NaviSite's Web hosting facility in Andover, Mass.

Executives listed here are all users of NaviSite's services. Their willingness to talk has been confirmed by Baseline.

Navisite Operating Results*

Gross margin21.0%24.0%7.6%
Operating loss-$4.77M-$18.77M-$30.19M
Net loss-$6.58M-$21.35M-$73.63M
Net margin-22.8%-23.4%-96.1%
Earnings per share-$0.24-$0.85-$6.32
R&D expenditureN.R.†$1.08M$0.95M

* Fiscal year ends July 31; FYTD reflects first three months Operating expenses include impairment and restructuring charges
† Not reported
Source: Company Reports

Other Financials**

Total assets - $117.71M
Stockholders' equity - $4.70M
Cash and equivalents - $1.02M
Long-term debt - $52.79M
Shares outstanding - 27.93M
Market value, 1/10 - $71.23M
**As of Oct. 31, 2004, except as noted


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