Rising Colo Prices Help SAVVIS Results

SAVVIS Communications is raising its colocation prices for existing customers, boosting its earnings by about $1.5 million per quarter, the company said last week during its second quarter conference call with analysts.

SAVVIS CEO Phil Koen said colo contracts for new customers are averaging $50 per square foot of space, while the rate for SAVVIS’ existing customers averages around $25 a square foot. “We are repricing those below-market contracts as they come up for renewal,” Koen said. “We won’t be surprised if some customers choose to move their equipment in-house or choose another provider. However, given today’s environment, we don’t believe quality data center space will remain empty for long.”

Those increases helped SAVVIS boost revenue by $1.5 million in the first two quarters of 2006. The company expects the repricing benefit to continue at that rate through 2009, and noted that a “large contract reprices late in 2010.”

Colocation represents 57 percent of SAVVIS’ hosting revenue, with the other 43 percent attributed to its managed hosting operation, including a utility computing solution that provides dynamic computing, storage and security.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.