Internap Plans More Data Center Growth

Internap Network Services (INAP) plans to add an additional 50,000 square feet of data center space in the first half of 2008, the company said today in its quarterly conference call with analysts. Company officials said the additional space will allow it to offer more services to its 3,552 customers.

Internap recorded net income of $1.8 million and earnings of 4 cents a share on $60.9 million in revenue for the third quarter, compared with net income of $195,000 and earnings of 1 cent a share on $45.9 million in revenue in the year-ago period.

"In the third quarter we secured attractive financing to support the expansion of our data center facilities," said Internap CEO James DeBlasio, who said the initiative would include expansions in both company-owned data centers and partner sites. Internap operates eight facilities, and leases space in 28 third-party data centers. The company sites comprise 52 percent of its data center footprint.

Internap said its colocation business had $21.7 million in revenue in the third quarter, a 47 percent increase compared to the third quarter of 2006. "The margins for our colocation business are improving," DeBlasio said. "As we add more square footage in our facilities that will continue to improve."

"We use our colocation platform as an opportunity for future growth," said Internap CFO Davis Buckel, who described its colo business as "an attractive entry point" for enterprise customers who may later purchase route optimization or content delivery network (CDN) services from Internap.

Internap is increasingly focused on the CDN business as a driver for future growth and margin improvement. It recently announced a hybrid CDN that offers P2P capabilities, and says it will announce a premium CDN service in the fourth quarter. "We will be creating an entirely new standard in CDNs," said DeBlasio.

Company officials said they did not expect competition and aggressive pricing from competitors to affect its CDN offering, which it described as a premium service. "To the extent that there is pricing competition, it's not something we are seeing or are affected by," said Internap chief strategy officer Philip Kaplan.