NaviSite Sharpens Enterprise Focus

NaviSite (NAVI) reported financial results for the second quarter fiscal year 2010, ending January 31, 2010. CEO Arthur Becker said the company expects the most growth to come from enterprise customers, and will focus on that segment as it prepares to launch its managed cloud offering.

NaviSite saw a significant increase in the contract value in its recurring enterprise-hosting business, which went from $8.9 million in the previous quarter to $25.3 million in the second quarter, a 183% rise.  The net loss attributable to common shareholders for the second quarter of 2010 was $2.9 million, compared to a loss of $3.3 million in the second quarter of 2009.  Income from operations and gross margin improved in the second quarter 30% and 34% respectively. New monthly recurring hosting revenue increased 112% from the first quarter to $0.86 million.

At the end of the third quarter fiscal year 2009 NaviSite decided not to renew the lease on its Los Angeles data center.  The company will continue to shed its remaining six non-core pure colocation facilities throughout 2010. It was also noted that the term of its U.K. data center lease has been shortened from 10 years to 7 year.

NaviSite's focus on the enterprise cloud services market continued last month by selling its Lawson/Kronos Applications Services business to Velocity Technology Solutions, where NaviSite also relinquished a 11,250 square foot Minneapolis data center lease.  Plans to divest its colocation operations began last summer and CEO Arthur Becker provided an update late last year.

NaviSite also recently promoted R. Brooks Borcherding to President, responsible for sales, marketing, operations and service delivery. Borcherding's primary objective will be accelerating NaviSite's transformation into a leading provider of complex hosting, application management and cloud solutions for enterprise customers.  Brooks was previously Chief Revenue Officer with NaviSite and before that was with Cisco.

In 2009 NaviSite's stock climbed from $.0332 to $2 by the end of the year.  Since then it has continued to grow, closing Thursday at $3.  The complete transcript of the earnings call can be found on Seeking Alpha here.