SolidNode

Here’s a roundup of news announcements from the data center and hosting industry:

• 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.

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Roundup: Internap, Rackspace, Joyent, Isilon

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Internap Network Services (INAP) said Thursday that it will expand its data center in Seattle as part of a broader effort to shift more of its colocation business from partner data centers into facilities owned by Internap. The Seattle expansion is expected to cost $22 million, or nearly half of the $50 million Internap has earmarked for its data center expansion.

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.

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Internap Expands Seattle Data Center

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Here’s a roundup of quarterly financial results announcements this week:

• 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.

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Earnings: Cisco, SGI, Limelight, Internap

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