Internap said it will add 27,000 square feet of new space in Silicon Valley, where the company operates four data centers in San Jose, Calif. The company will spend $23 million to build the new space in two phases, with the 14,000 square foot first phase scheduled to come online in the third quarter of 2010.

CEO Eric Cooney said the Silicon Valley market offers a “compelling opportunity for Internap” due to strong demand for space and an experienced local sales force.  

Internap will spend $5 million to add 5,000 square feet of space in its existing data center in Houston, which is nearing capacity. The company also provided an update on the Seattle expansion announced in November. The first phase of 7,500 square feet will open for customers in the third quarter of 2010. 

Internap said its move to focus on company-controlled colocation space has already helped its profit margin in its colocation business, which has improved from, 25 percent in the second quarter of 2008 to 30 percent in the fourth quarter. Seasonal variations in power pricing also helped the company’s margins.  

“Our data center value proposition is built on our ability to offer premium data center space and IP services,” said Cooney. “We’re well-equipped to compete, and our track record in company-controlled colo space reflects our capacity for growth.”

Dimension is the third investment company to take a large position in Internap in the past two weeks. On Jan. 29 BlackRock Inc. disclosed a 5.9 percent stake in Internap, while Kornitzer Capital Managment said on Jan. 22 that it owns 6.7 percent of INAP shares.

Internap provides colocation, content delivery and network optimization services from a network footprint of about 250,000 square feet of space. Since taking over last year, CEO Eric Cooney has focused on an expansion of the company’s data centers, while it reduces its dependence upon space leased from third-party providers.

SGI Selected by Institute of Cancer Research. SGI announced Tuesday that the Institute of Cancer Research (ICR) has selected SGI Altix UV with Intel processors to support its research. The SGI high performance computing (HPC) facility will provide ICR with a massively scalable shared memory system to process hundreds of terabytes of data across thousands of CPUs. The SGI Altix UV supports up to 16 terabytes of global shared memory in a single system image. ”Altix UV will meaningfully transform HPC by drawing on large memory capacity, high core count and scalability of our forthcoming next generation Intel Xeon processor-based server platform, for the expandable server segments (codenamed Nehalem-EX),” said Richard Dracott, general manager of high performance computing at Intel.

Level 3 delivers backbone for TDS Telecom. Level 3 announced that it will provide backbone network connectivity for TDS Telecommunications to support the recent deployment of their all-IP nationwide network.  “The Level 3 network enables TDS to deliver high-quality services to our end-user customers, while also providing operational and cost benefits for TDS to better manage our nationwide network,” said Ken Paker, Vice President Network Services at TDS.  A new 10 Gbps network architecture allows TDS to connect core locations with more than 25 10 Gbps wavelengths, provided by Level 3.  TDS is a Madison Wisconsin based company that is the eighth largest wireline phone company in the U.S.

Internap Provides CDN for Sundance Festival.  Internap Network Services (INAP) announced that they are an official provider of Content Delivery Network (CDN) services for the 2010 Sundance Film Festival in Park City, Utah. Sundance will use the CDN to streamline the creation, delivery and management of interactive web content that promotes the event itself and the work of independent filmmakers year-round.  “Internap’s CDN allows us to easily create and share streaming video and other new types of content – an increasingly vital part of building awareness of our artists and bringing their work to a global audience – while ensuring a consistently reliable viewing experience, even during the dramatic spike in web traffic that occurs during the Sundance Film Festival,” said Joseph Beyer, associate director at Sundance Institute Online.

• Internap Enhances CDN for High Quality Video. On Tuesday Internap Network Services announced enhancements to its content delivery network (CDN) offering, including new ease-of-use functions and automation of key CDN capabilities.  A comScore Video Metrix service poll showed that in September 2009 more than 84.8% of the total U.S. Internet audience watched online video. Version 5.0 of Internap’s CDN MediaConsole includes an integrated rule-based transcoding that automatically converts video into the ideal formats for a broad range of devices.  It also performs a continuous bitrate adjustment that dynamically adapts video streams based on the capabilities and bandwidth of the network.  Internap is showcasing its CDN offering at the Streaming Media West conference November 17-19.
• Rackspace Launches Cloud Drive. Rackspace (RAX) announced a set of new product offerings that help businesses move their IT applications into the cloud.  New products include Cloud Drive, Server Backup, and an upcoming release of Hosted Microsoft SharePoint.  The new cloud products mark an aggressive move by Rackspace to expand into collaboration and backup applications and compete in the software-as-a-service market.  Rackspace Cloud Drive is a cloud-based, online file storage application that allows individuals and teams to store, share and backup files. Rackspace Server Backup is a cloud-based, online server backup application designed to protect file server data.  Both Server Backup and Cloud Drive are powered by technology from Jungle Disk, a Rackspace subsidiary acquired in 2008.

• Joyent Secures $8.5 million from Intel Capital. Cloud provider Joyent announced Tuesday that it received an infusion of funding from Intel’s global investment organization, Intel Capital.  The funds will be used to accelerate its product development, sales and marketing and an increased global expansion. “Joyent has developed its own data center virtualization technology that creates a flexible multi-tenant cloud,” said Joyent CEO David Young. ”As a result, Joyent’s technology delivers more than 70 percent utilization, which is eight times more than industry averages.”
• Isilon announces new scale-out NAS products. Isilon Systems announced the release of the Isilon IQ 72000X and 72NL scale-out NAS products, bringing to market a 10 Petabyte single file system and single volume for nearline archive and disk-to-disk backup environments.  The new products leverage Hitachi 2TB drives to double system capacity while reducing power, cooling and data center footprint by 50 percent.  The IQ 72NL combines 72 Terabytes of storage in a 4U chassis and will scale to more than 10 Petabytes in a single file system.  Both products are available currently in limited quantities, and will be generally available in January 2010.

The project will add 15,000 net sellable square feet of capacity to Internap’s current footprint in Seattle, with the new space expected to open during the third quarter of 2010. “Seattle was a compelling choice for expansion because of our multi-facility footprint, local market knowledge, existing sales and support infrastructure as well as our ability to leverage brand reputation,” said Internap CEO Eric Cooney. “We feel this market offers Internap a unique opportunity to expand with relatively low risk and relatively high reward.”

Seeking Improved Margins
The shift in data center strategy is driven by the opportunity to realize better profit margins. Internap’s data center revenue is about evenly split between in-house data centers and space leased from providers like Equinix. In Thursday’s conference call with analysts, Cooney said Internap sees a 50 percent margin on customers in company-operated data centers, as opposed to 5 percent in partner facilities.

“Going forward, we will continue to execute our data center strategy to focus on growth and company control data centers, while we proactively reduce our partner data center providers to a small number of mutually beneficial relationships,” he said.

How will that be accomplished? “We intend to proactively churn select loss making and or low margin partner colocation revenue,” said Cooney. “As most of these contracts are short term being less than 12 months in many cases we will simply choose not to renew these contracts. In other cases, we are seeking to renegotiate the contract and pass the customer directly to the data center provider. In both scenarios we expect to retain the Internap value added services such as IP transit or CDN which those customers are also taking.”

Internap said it expects this will mean a quarterly decline of about $5 million in partner colocation revenue by the fourth quarter of 2010, but will boost the profitmargins on the remaining partner data center space from the current 5 percent to about 20 percent.

• Cisco reports first quarter 2010 Earnings.  Cisco reported first quarter results Wednesday for the period ended October 24, 2009.  Net Sales were $9 billion in the first quarter, a decrease of 13% year over year.  CEO John Chambers noted that the fourth quarter of 2009 was a clear tipping point and first quarter 2010 results continued to reflect strong sequential growth trends. Chambers also said “a new model of productivity based on collaboration is clearly emerging and we believe this may be the most profound opportunity for businesses in our 25 years as a company.” Sitting on total cash of $35.4 billion, the Cisco build – buy – or partner innovation engine is ready gain momentum in 2010.  Cisco also announced that up to $10 billion in additional repurchases of its common stock was authorized by its board of directors.
• SGI reports first quarter 2010 results. SGI reported first quarter 2010 results Wednesday for the period ending September 25, 2009.  Revenue increased by 103% from the prior quarter and 88% from the comparable year ago quarter on a non-GAAP basis. “Operationally, our integration is ahead of schedule in most key areas,” said SGI CEO Mark J. Barrenechea. “We also introduced new products that could expand our addressable market by over $1.7 billion while investing for long-term growth.” Cash, cash equivalents, investments, and restricted cash for the end of Q1 was $123.5 million, compared to $139.5 million at the end of the prior quarter.

• Limelight reports third quarter 2009 results. Wednesday Limelight Networks reported financial results for the third quarter of 2009.  Revenue for the quarter was reported at $32.5 million, up 1% from the second quarter of 2009.  Capital investments were $10.6 million and the company ended the quarter with approximately $153 million in cash and short-term marketable securities. ”With our recently announced XD Platform and the mobility and monetization solutions we released during the quarter,” said Limelight CEO Jeff Lunsford, “we are positioning Limelight Networks to be a core provider of cloud-based services within this transformed world, helping forward-thinking media, entertainment, enterprise and government organizations leverage the next-generation Internet’s capabilities to differentiate from their competitors and better serve their constituents.”
• Internap reports third quarter 2009 results. Internap reported revenue of $64.4 million Thursday, a decrease of 1.5% compared with the third quarter of 2009. Internap CEO Eric Cooney noted early signs of progress with $7.6 million in adjusted EBITDA and several important milestones in the turnaround of Internap’s business. Cooney also noted several steps being taken to stabalize a fourth consecutive quarter of declining revenue for Internap’s IP Services. The next generation content delivery network platform Internap promised in previous earnings calls will be released at the November 17th Streaming Media Web trade show. CFO George Kilguss noted that CapEx should increase in 2010 as Internap plans a new round of colocation expansions.

• Energy-Aware Internet Routing. An energy reduction of as much as 40% could be seen by rerouting data to locations where electricity prices are lowest on a particular day.  This was according to a study from MIT, Carnegie Mellon University, and Akamai.  MIT PhD student Asfandyar Qureshi first outlined the idea of a smart routing algorithm in October 2008 and he then approached researchers at Akamai to obtain the real-world routing data needed to test the idea.  ”The researchers first analyzed 39 months of electricity price data collected for 29 major US cities. The team then devised a routing scheme to take advantage of daily and hourly fluctuations in electricity costs across the country”.  Lawrence Berkeley National Laboratory staff scientist Jonathan Koomey said “the trick is to be able to control these systems well enough to create controls that are cheap enough to be able to take advantage of the arbitrage opportunity available from different electricity prices, without effecting reliability or latency.”  The research paper, to be presented at SIGCOMM 2009 can be found here.
• Tradebeam selects Savvis to support IT infrastructure. Savvis announced Monday an agreement to provide hosting services to TradeBeam, a software-as-a-service provider for global trade management (GTM).  TradeBeam’s solutions facilitate billions of dollars of global trade.  TradeBeam Vice President of IT said “Savvis is an industry leader offering a global footprint of high performance SAS 70 certified data centers integrated with one of the world’s largest Tier 1 networks”.
• XO Communications embarks on third nationwide network capacity upgrade. The XO inter-city transport network will more than double in capacity with the latest upgrade, to be completed later this year.  XO Communications again chose Infinera products to deploy the ultra-long-haul network, this time using Infinera’s ILS2 line and delivering 160 wavelengths on a single fiber.  The 1.6 Terabits/second optical capacity will service carriers, service providers and enterprise customers as well as XO’s Carrier Services network transport offerings.  The current Infinera DTN system is the only DWDM system with 160 wavelengths in the C-band and is scalable to 8 Tb/s in the future.

• Layer 2 data center network scaled to 100,000 nodes. Scientists at the University of California, San Diego have created software that they hope will lead to data centers logically functioning as a single network.  The prototype, PortLand is currently running in the lab as a fault-tolerant, layer 2 data center network fabric capable of scaling to 100,000 nodes and beyond.  ”With PortLand, we came up with a set of algorithms and protocols that combine the best of layer 2 and layer 3 network fabrics”, said Amin Vahdat, senior author on the paper to be presented at SIGCOMM and computer science professor at UC Sand Diego’s Jacobs School of Engineering.  A key innovation in PortLand is location discovery protocol, where switches automatically learn their location within the data center topology without any human intervention.
• Juniper Networks grows in the enterprise switch market. Surpassing one million ports shipped, Juniper continues to make an impact in the enterprise ethernet switch market. Juniper announced Monday that its EX series Ethernet Switches posted four consecutive quarters of revenue growth through second quarter 2009 and have surpassed one million ports shipped.  Revenue for the EX series grew 44 percent over the previous quarter and 312 percent over the same quarter last year.  Partially fueling that growth was the June announcement that Juniper was planning an ultra-low latency network for global trading data centers with NYSE Euronext.  Mike Banic, vice president of product marketing at Juniper said “based on the companies covered in the Dell’Oro report, over the past five quarters of revenue shipments, Juniper has grown its EX Series switch revenue faster than any enterprise Layer2/Layer 3 switch vendor entering the market in the previous decade.”

Internap operates its own data centers, but also leases space from data center partners. Internap operates 144,000 square feet of its own space and leases 106,000 square feet. Paolo Gorgo has an interesting analysis of Internap’s data center operations at Seeking Alpha, which shows that Internap had actually done a better job filling space in partner facilities than in its own sites, partly due to churn issues. So why build additional space of its own?

It turns out that Internap is taking a close look at its data center partner relationships, and the additional space may provide flexibility in consolidating space as it evaluates its partnerships.

“We have today a large number of data center partners,” said Cooney. “Our intention is to streamline those partnerships i.e., reduce the number of data center folks that we partner with. We’ll be looking to partner in markets where we don’t have data center square footage and we’ll look to do that with a very small number of partners that generate for them a meaningful amount of revenue. So I think for those partners we choose to work with. I think it will be a compelling win-win relationship and for those we choose not to, there’s probably good reason for that frankly on both sides.”

Ooma chief marketing officer Rich Buchanan used his Twitter feed to blame Internap for the problems.”Ooma issues were linked to an outage at Internap, Buchanan wrote. “It also affected RIM, Google, Yahoo, Blue Cross, TM, Verizon, and others.”

When media reports began citing Internap, company spokeswoman Debra Forrester denied that Internap had any downtime, telling Betanews and the Business Times that the problems must be on Ooma’s network.

Ooma’s Buchanan shot back: “We have the network logs to show that their service was not performing to specification, and that subsequently caused our network outage,” he told the Business Times. “It’s unfortunate that a network provider with the reputation that Internap has would stoop to such levels to avoid responsibility.”

Before long, Internap was calling back those same media outlets to backpedal, saying the outage was still under investigation. ““We will either find out it was indeed our problem, or they will find out it was them,” Forrester said.

“Internap retracts false statement about ooma service outage,” Buchanan Tweeted shortly afterward. “Cheap shot Internap.”

For what it’s worth, there are multiple reports that Ooma experienced more downtime this morning.

The move comes just two weeks after a leadership change in which Eric Cooney took the reins as president and CEO. “These actions simplify our organization and enable us to focus and invest in our core competencies including: customer support, engineering, and sales,” said Cooney. “By acting decisively, we better prepare the company to manage through a tough economy, improve results and increase value for customers and shareholders.”

Cooney started on March 16, succeeding James DeBlasio, who had been president and CEO of Internap since 2005. In addition to announcing the cost reduction plan, Internap also provided revenue and EBITDA estimates for first quarter 2009. The company also said revenue for the quarter is expected to be in the range of $62 to $65 million, roughly in line with Wall Street expectations, and adjusted EBITDA is expected to total between $4 and $5 million.

In March 2008 the company lowered its revenue guidance to reflect the impact of outages on the VitalStream network. In October Internap took a $100 million charge to reflect the decreased value of its CDN business.