Internap Network Services regrouping after losses

“Internap has been in need of a turnaround and a restructuring and a revisiting of our strategic direction,” said Eric Cooney, Internap’s president and chief executive officer.

“We are making significant capital investment decisions with what we believe is a clear and compelling strategic direction in mind,” he said.

Not only is the company forking out $50 million in capital investments, but Cooney also said Internap scored a major win in late April when it launched its Accelerated IP “XIP” – a new service-based Internet traffic accelerator -- at Interop in Las Vegas.

“This product can enhance [enterprise Web] performances in excess of 400 percent,” he said.

Various blogs highlighted the product’s ability to offer faster load times in all sorts of video and other multimedia applications. Another plus is that the service – which will be made available in selected markets this spring – requires no client-side software so that customers can use it wherever they are.

“We got a strong positive reception as XIP is something that is beneficial for so many different applications,” he said.

Founded as an IP service provider in 1996, Internap has been one of Atlanta’s quiet success stories, at least from the standpoint of helping thousands of customers better deliver their content over the Internet while growing to nearly 400 employees – more than 50 percent of whom are based in Atlanta.

But investor confidence has often been sorely tested. For example, when the company tried to integrate the former VitalStream content delivery network that it had purchased for $217 million in 2007, it was forced to lower its revenue guidance in 2008 as a result of outages on the VitalStream network.

A year ago Internap hired Cooney – previously the CEO of Tandberg Television, part of the Ericsson Group – to help boost shareholder value. Cooney also is on the board of directors. The company has made strides in regaining the trust of at least some investors, he said.

“Although we’ve had losses we did see better and better profitability last year in sequential quarters,” Cooney said, noting that the share price has climbed over the past year from $2.24 to $5.88.

Internap posted first-quarter results last week, reporting that its net loss narrowed to $260,000 from $6.6 million in the same period a year earlier. The company also said its profit excluding interest, tax, depreciation and amortization, or EBITDA, more than doubled. Revenue was virtually flat at $63.4 million.

Analysts say the sector has suffered from a long slump and that Internap's losses aren't surprising.

“The company’s restructuring efforts of the past 12 months are beginning to bear fruit," said Melanie Posey, research director at IDC in New York.

Analysts said Internap’s plans to rely more on its own facilities rather than to resell data space in partner locations will likely result in higher profit margins down the road.

The company is adding 5,000 square feet of leaseable space to its existing 14,000 square feet of space at its Houston facility, as well as expanding its Seattle facility, while opening a new 24,000-square-foot data center in Santa Clara, Calif. The latter move is a bid to meet the demands of high-tech companies based throughout California, including in Silicon Valley.

New space is needed to house more servers, which customers can lease for the hosting of databases as well as for the better managing of their Web site traffic.

Internap also is looking outside the country for opportunities.

“There’s been a more aggressive movement into Europe over the past year as we’ve opened up a Frankfurt office, adding to our offices already in London and in Paris,” said Peter Evans, senior vice president of marketing.

“We will have to select which markets we want to expand in further as we are investing selectively overseas,” he said.

Cooney said overseas investments will continue although North America is the company's main focus.

“We see both Western Europe and Asia as big growth markets for us,” he said. “The demand for the type of services we are offering is a global one.”