Savvis (SVVS) today announced plans to develop four new data centers to help meet customer demand for its managed hosting and colocation services. The new facilities will be located in Atlanta, New York, Washington, DC and Santa Clara, Calif., and should be open to customers in the fourth quarter of 2007.
The announcement comes on the same day that Savvis announced the sale of its content distribution network to Level 3 for $135 million, which provides Savvis with a financial warchest to invest in new data centers. Savvis said it anticipates spending approximately $200 million in 2007 to fully develop the four centers, and said it has executed lease agreements for each of the sites, one of which is contingent upon certain conditions expected to be met in January 2007.
"SAVVIS is focused on delivering IT infrastructure as a service and we're committed to being a leader in this space," said Phil Koen, SAVVIS' Chief Executive Officer. "Our new data center facilities, opening in the fourth quarter 2007, will provide customers with state-of-the-art managed hosting and colocation services, including our industry-leading virtualized utility services."
The four centers will add approximately 180,000 square feet of raised floor space, boosting Savvis' total data center footprint more than 10 percent to over 1.5 million square feet. The company said the new centers will be "designed to exacting standards for security and reliability, power availability, cooling, network connectivity, and environmental controls."
Savvis will deliver a broad range of hosting, network, and security services from these data centers including colocation, managed hosting on dedicated platforms, and virtualized utility services that provide significant cost and performance benefits for enterprise customers.
The announcement underscores Savvis' intention to beocme a larger player in utility computing. The company said it plans to reserve approximately 20 percent of each facility for managed hosting and virtualized utility services, offering customers the flexibility to mix, match, and add services within a single facility and across data centers.
Savvis says the expansion will reduce Adjusted EBITDA by approximately $6 million in 2007 and will begin to generate revenue in the fourth quarter of 2007. The four facilities are expected to generate be cash flow positive within 12 months of opening, and generate $50 million of revenue in that first year.
The deal also represents a major vote of confidence in the colocation market. "Given strong demand and limited supply of colocation facilities, the company expects that the 80% of space dedicated to colocation will be fully occupied within 18 to 24 months of opening, and that 20% of new space committed to the managed hosting services will be ample to meet customer demand for five to seven years," Savvis said.