Savvis shares rise after earnings report

Savvis Inc. Shares (SVVS) rose 20 percent on Wednesday after the managed hosting company reported strong second-quarter earnings, prompting an analyst upgrade. On Tuesday, Savvis announced second-quarter revenues of $212.9 million, up 13% from the same period a year earlier (excluding asset sales, which boosted 2007’s second-quarter results). The company’s new data center revenue doubled to $14.2 million.

The strong results reassured analysts, including one who downgraded the company’s shares in April after disappointing first-quarter results. Jefferies analyst Jonathan Schildkraut upgraded his rating on Savvis from Hold to Buy and set a $20 price target for the company’s stock. Schildkraut said he now had “increased confidence in management’s prospects for 2008.” Savvis shares rose $2.79 to $16.43 on Wednesday, an increase of 20.5%.

Following the rapid expansion of the company’s data center network, analysts have focused on Savvis’s ability to lease space in new facilities while continuing to generate revenue from older locations. The company had good news on both fronts.

“We continue to see attractive new data center occupancy rates with approximately 67 percent of Phase I data center colo space sold,” said Savvis CEO Phil Koen. “We also opened a data center in Singapore in July and, together with data centers in Boston, Chicago and Dallas, we sold approximately 32% of the colo space in these centers. Our growing IDC data centers (Internet Data Centers) have continued to generate prices averaging just under $70 per square foot per month, while yield per square foot, including managed hosting and network services, is just over $80 per square foot in these centers. square foot.”

Koen said Savvis has also been able to fill its older data centers with power densities of less than 100 watts per square foot. “I think some people wrongly believe that demand for these IDCs is low, when in fact sales on them are continuing at a steady pace as we approach the saturation point,” he said. “In fact, in the second quarter, 20 percent of our installations were to our standard powered IDCs, and these centers are now approximately 70 percent utilized. High-power IDCs take up about a quarter of our salable square feet and have had some of the highest demand, so they are currently about 80 percent utilized.”

Savvis said it continues to expand its Proximity Hosting service, a low-latency automated trading offering for clients in the financial industry. In the second quarter, Savvis launched contactless hosting services in London, Chicago and Singapore. The company also announced new or expanded customer relationships including CMPi, Cognisco, Ellie Mae, iJet and Star Compliance, and extended a key contract with Thomson Reuters.