Savvis Communications: Looking Past the Red Ink
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.
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 usand we're not a big fish in terms of their portfolio."
Savvis Operating Results *
* 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
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