Internap Shares Slip on Lower Guidance

Shares of Internap Network Services (INAP) lost ground today after the company lowered its revenue projections, citing slower growth due to fallout from outages and customer credits in its CDN network. Shares of Internap fell 33 cents, or 6.6 percent, in early trading after the stock was downgraded by Roth Capital, Cowen & Co and Stanford Research.

Internap said it now expects full-year revenue growth of 13 percent to 18 percent over 2007. The company had previously forecast revenue growth of about 25 percent for the year.

“The last several months have been challenging,” said Internap CEO James DeBlasio. “In hindsight, the complexity of the VitalStream integration stressed our processes.” Internap shares lost a third of their value in mid-March after the company reported that it would delay filing its annual report with the SEC as it sorted out up to $2 million in customer credits from outages on the VitalStream CDN network, which Internap acquired last year.

The losses have led to management changes. On March 27 Internap named George E. Kilguss III as its new Chief Financial Officer. On April 8 Internap said Chief Operating Officer Vincent Molinaro was leaving the company “to pursue other interests.” DeBlasio will now take on the COO duties as well. “We are returning to the structure and focus that helped Internap prosper in the past,” said DeBlasio. The shakeup has gone beyond the executive suite, as DeBlasio said there has been significant turnover in the company’s sales staff as well.

Internap’s first quarter numbers were mixed, as customer churn and pricing pressures led to a slight drop in revenue for its IP services business, while the CDN operation revenues were slightly better than expected. The company’s data center business was boosted by expansions for two major customers, SoftLayer and Quality Technology Services.

Internap now has a total data center footprint of 185,000 square feet, including 103,000 square feet managed by Internap and 81,000 square feet for partners. About 141,500 square feet is occupied for a 76 percent fill rate.

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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.

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