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Rising Colo Prices Help SAVVIS Results

The average price of colo contracts at SAVVIS is half the current market price, and the company is repricing contracts at $50 a square foot as they come due.

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.