Savvis Communications: Looking Past the Red Ink

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

Savvis Communications also has been floating in red ink, but customers say they're reassured by its track record.

Savvis Communications provides top-tier network facilities and responsive support, Web hosting customers say, and those pluses outweigh anxiety about its sickly balance sheet.

For C-SPAN, Savvis executives' candid discussion of strategies for growing the business was reassuring, says Robert G. Kennedy, an executive vice president who oversees the cable channel's operations. "We felt good about how Savvis answered our questions about their financial stability," he says. Solid references and "competitive pricing" tipped the balance in Savvis' favor when C-SPAN evaluated hosting providers in mid-2003, Kennedy says. View the PDF -- Turn off pop-up blockers!

Savvis, like others in the Internet services sector, has returned dismal financial results. While it has boosted revenue, the company has reported operating losses since going public in 2000 and has regularly posted a stockholders' deficit, which means liabilities exceed assets.

Savvis CEO Rob McCormick says the losses are largely from depreciating assets and acquisition-related costs (which the company counts against operating expenses). "Revenue is covering all our expenses," he says. In 2003 that wasn't true, but for the quarter ended Sept. 30, 2004, Savvis would have eked out a $5.1 million operating profit excluding special charges.

Neil Matheson, CEO of medical consulting firm AXIS Healthcare Communications, heard only high praise for Savvis when he checked references three years ago. "We figured, if it's true they're really this good, they'll have to be around," he says. Matheson says AXIS hasn't experienced "a single minute" of downtime since switching to Savvis in early 2002. Maybe just a few seconds? "I'm sure there are little things that slip by," he says, "but nothing that causes us concern."

Savvis has also been adept at managing acquisitions in the hosting arena. When Intel sold its Web hosting operations to Savvis in late 2002, Jordan's Furniture, a retailer in Avon, Mass., decided to stick with Savvis. After the changeover, there was virtually no disruption of service, says Peter C. Clark, director of information systems at Jordan's. "Intel had done a very, very good job of communicating when there were problems, and we didn't want to lose that," he says. "Savvis understood that."

Adds Clark, "We've been very pleased with the attention Savvis has given us—and we're not a big fish in terms of their portfolio."

Web Hosting

Savvis Communications
1 Savvis Pkwy.,
Town & Country, MO 63017
(314) 628-7000


Employees: 2,000

Rob McCormick
Chairman & CEO
Appointed chairman and CEO in December 1999. Previously chief operating officer at Bridge Information Systems, a financial data firm that spun off Savvis in 2000.

Tim Caulfield
Managing Director, Consulting & Hosting
Joined in 2004 when Savvis bought the assets of Cable & Wireless America, where he was in charge of consulting and hosting. Prior to that, he headed operations for Exodus, a hosting company acquired by Cable & Wireless in 2002.

Under its Intelligent Hosting offerings, the company manages 12,000 servers at five data centers in the U.S. and at facilities in London, Singapore and Tokyo. Fast Pack Intelligent Hosting services are preconfigured sets of hosted applications designed for quick deployment.

Reference Checks

Robert G. Kennedy
Executive VP
(202) 737-3220
Project: Cable channel in Washington, D.C., hosts a duplicate version of its main site at Savvis' St. Louis-area data center as a backup.

Jordan's Furniture
Peter C. Clark
Dir., IS
Project: Savvis manages four servers—two Web servers and two Microsoft SQL Server databases—for the New England furniture chain.

Bruce Eisen
(310) 314-3000
Project: Movie-on-demand company in Santa Monica, Calif., offers 5,000 films and other programs online; it transferred its Internet hosting services contract to Savvis after Intel sold its hosting operations in 2002.

AXIS Healthcare Communications
Neil Matheson
Project: Savvis provides Web hosting and virtual private network services to the 260-employee medical consulting company, based in Yardley, Pa.

James Peltier
Project: In early 2004, the event-registration company moved to Savvis' managed hosting services. It pays Savvis $8,000 per month to manage two Web servers and a pair of Microsoft SQL Server databases.

CBID Markets
Ray Hori
Project: Toronto-based electronic securities trading network hosts its Web servers in Savvis' network facilities.

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

Savvis Operating Results *

Gross margin27.4%35.3%31.3%
Operating loss-$92.32M-$86.58M-$70.15M
Net profit/loss-$127.13M-$94.03M$13.93M
Net margin-28.2%-37.2%5.9%
Earnings per share-$1.43-$1.34-$0.65

* Fiscal year ends Dec. 31; YTD reflects first nine months.
operating expenses include depreciation and amortization charges of $51.6 million for the nine months ended Sept. 30, 2004; $55.3 million for 2003; and $60.6 million for 2002.
Source: Company Reports

Other Financials**

Total assets - $423.02M
Stockholders' deficit - -$43.65M
Cash and equivalents - $53.40M
Long-term debt - $157.82M
Shares outstanding - 111.97M
Market value, 1/10 - $123.65M
**As of Sept. 30, 2004, except as noted


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