Savvis 4Q Loss Narrows, Backs 2011 Revenue Outlook

Savvis Inc. (SVVS) said Tuesday its fourth-quarter loss narrowed and issued a 2011 revenue outlook in line with analysts' expectations as the data storage provider said it's seeing strength in its managed services business.

Savvis, a data center operator that provides web hosting, network and other so-called cloud-computing services, has seen its stock more than double since July and last week hit its highest level since late 2007. Investors have been guessing during the run-up that Savvis could be the next takeover target amid increasing consolidation within the data-storage industry.

Savvis Chief Executive Jim Ousley has said his company isn't rushing for a takeover.

For the quarter ended Dec. 31, Savvis posted a loss of $2.95 million, or 6 cents a share, compared with a year-earlier loss of $5.36 million, or 10 cents a share. Adjusted fourth-quarter earnings before interest, taxes, depreciation and amortization in the latest period was $67.8 million.

Revenue increased 15% to $252.7 million, above the average analyst estimate of $248.6 million on Thomson Reuters.

"Our remarkable fourth quarter results were an appropriate end to 2010, with good growth in managed services, colocation and network revenue reported on both an annual and a quarterly basis," Ousley said in a statement. "We expect to see a general continuation of these trends in 2011, with specific strength in our managed services business."

Savvis shares closed Monday at $32.10 and were inactive in premarket trading.

Savvis is benefiting in managed services as businesses appear to be spending more money on updating their software and outsourcing management of their data centers. This reflects a growing interest in cloud computing, which enables companies to access computer servers and data storage over the Internet and internal networks, allowing them to lower data costs and move content more nimbly.

For 2011, Savvis continues to expect revenue in the range of $1.03 million to $1.06 million. Analysts had forecast 2011 revenue at $1.05 million.

Savvis said it expects 2011 adjusted EBITDA of $265 million to $290 million and total cash capital expenditures of $220 million to $240 million.

In a research note published last week, William Blair & Co. analyst Jim Breen said Savvis has one of the best groups of assets in the managed hosting and cloud infrastructure business.

"We believe that the acquisitions of Terremark and NaviSite are indicative of the growth potential of the cloud segment," Breen said. "Large carriers are willing to pay a premium for managed cloud platforms. This has positive implications for Savvis."

Over the past two weeks, Verizon Communications Inc. (VZ) agreed to acquire Terremark Worldwide Inc. (TMRK) in a $1.4 billion deal, and Time Warner Cable Inc. (TWC) signed to buy NaviSite Inc. (NAVI) for $230 million.

-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; [e-mail]