NaviSite Shopping Its Colocation Business

Navisite (NAVI) says it will move ahead with a plan to sell its colocation business, even though the company has regained compliance with the NASDAQ Stock Market guidelines on minimum market valuations. NaviSite decided to seek buyers for its colocation business as part of a strategic plan to address its NASDAQ compliance challenges, but an improvement in the company's stock price helped NaviSite meet the exchange's minimum market cap of $35 million for 10 consecutive sessions.

But NaviSite says it will focus on building its higher-margin enterprise application hosting and cloud platform and use revenues from the asset sale to de-leverage its finances. "The company continues to pursue its strategic plan in order to improve the company’s balance sheet by reducing its debt obligations and focus on its core businesses for growth and performance," NaviSite said in a statement Tuesday.

On June 4 NaviSite said it had hired the Bank Street group to solicit interest in its colocation assets. "We anticipate that we should be able to provide an update on our activities here within the next 60 to 90 days," said President and CEO Arthur Becker.

As part of its effort to divest its colo business, NaviSite opted not to renew the lease on its Los Angeles data center at the Garland Building (1200 W. Seventh), which housed colocation clients. "Despite attempts during the last two years to renew this lease, the landlord insisted on a rent increase at a significant multiple and we could not agree to a price that would allow us to continue to run that business profitably," Becker said in NaviSite's June 4 conference call with analysts. "We reached an agreement however in which we transferred our customers back to the landlord and we let our lease expire."

That decision led to a loss of about $1 million in revenue for the quarter ending April 30.