The 'New and Improved' Terremark

It's been a busy year for Miami Internet infrastructure specialist Terremark Worldwide (TMRK), which has launched an expansion in Virginia, switched stock exchanges, bought managed hosting provider Data Return and arranged $250 million in financing for its expansion. The result, according to CEO Manuel Medina, is a "new and improved Terremark."

"We have evolved into a very unique player in the IT solution provider space," Medina told analysts in the company's June 14 earnings call. "We are a carrier-neutral operator of world-class data centers that at the same time provides customers with a full suite of managed services. We have built a company unlike any other. We now have the team, the services, the technology infrastructure and the financing in place to implement our strategy."

One interesting note: Terremark said it is maintaining current price levels for colocation services. With demand running strong and supply tight in key markets, many major colocation and managed service providers have raised colo prices, with existing customers having their contracts repriced upon renewal. Terremark says it is keeping prices level to maintain low customer churn, and is instead focusing on selling managed services to its colocation customers. A factor in that decision may be Terremark's space utilization rate, which currently stands at 61.1 percent of its technical space and just 18.6 percent of its overall data center square footage. Those percentages are influenced by the large amount of available space at the company's 750,000 square foot Technology Center of the Americas in Miami.

Terremark said managed services provided 49 percent of the company's in the quarter ending March 31 (4Q07), followed by colocation at 42 percent and exchange point services at 9 percent. The Data Return acquisition will boost Terremark's managed services income to more than 60 percent of its revenue.

The company gave a progress report on its planned expansions in Silicon Valley, saying it has a property under contract and expects to close on the purchase sometime this quarter and then begin construction in the first quarter of 2008. Terremark also said it is is reconsidering a planned expansion of its existing data center facility in Santa Clara, as it may prove more cost effective to add space in a Data Return facility in Pleasanton, Calif. Medina said Terremark has not yet decided which facility will be expanded, but that it expected to build out both sides eventually to meet customer demand.

Terremark's shares,m which hit $7.77 a share on June 6, have been declining since the June 14 earnings announcement, closing yesterday at $6.65 a share. While Terremark narrowed its loss from the year-earlier period, some analysts were disappointed with revenues that were depressed by several special charges, including a $200,000 customer refund (apparently involving bandwidth costs).

But Medina clearly remains confident. On June 15th he bought 100,000 shares of TMRK stock at $7.20, and now holds 3.8M shares (an 8.5% stake).