NaviSite: 'Teetering on the Edge'
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.
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."
Navisite Operating Results*
* Fiscal year ends July 31; FYTD reflects first three months Operating expenses include impairment and restructuring charges
Source: Company Reports
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