Blackbird Tech Selects Terremark

MIAMI & HERNDON, Va. - Terremark Worldwide, Inc., a leading operator of integrated Tier-1 Network Access Points (NAPs) and best-in-class network services, today announced that Blackbird Technologies, a security consulting company specializing in intelligent responses to threats faced by vital information systems, infrastructure and facilities, has signed a one-year $7.7 million contract for professional and managed services and to house critical infrastructure at Terremark's NAP of the Americas facility in Miami and NAP of the Americas/West facility in Silicon Valley. Read the full release ...

Equinix Pays Off Credit Facility

FOSTER CITY, Calif. - Equinix Inc. today announced that the Company has paid the remaining $34.3 million outstanding under its $150 million credit facility and terminated the facility. Together with the scheduled redemption of the remaining $30.5 million outstanding under its 13% senior notes on March 12, 2004, the Company has reduced its interest rate on outstanding debt that requires cash interest payments from approximately 10% to 2.5%. Read the full release ...

XO Cleared to Buy Allegiance

RESTON, VA - XO Communications, Inc. today announced that Judge Robert Drain of U.S. Bankruptcy Court for the Southern District of New York has issued an order approving XO Communications’ proposed purchase of substantially all of the assets of Allegiance Telecom, Inc. for approximately $311 million in cash and 45.38 million shares of XO common stock. The transaction remains subject to, among other things, applicable federal and state governmental regulatory approvals and termination of applicable waiting periods. Read the full release ...

FBI Shutters Web Host

If FBI agents showed up at your data center bearing a warrant, would you be able to provide them prompt access to customer data? How long would it take?

That's an important question in the wake of an FBI raid of Columbus, Ohio hosting company CIT Hosting last Saturday. Federal agents wound up shutting down the entire operation, seizing all the company's web servers and all customer data as part of its investigation of a hacking incident.

CIT Hosting, also known as FooNet, markets itself as "the leader in the IRC and DDoS protection business for the last 5 years." The company posted a web page informing customers that its data center was shut down, and instructing customers to contact the FBI if they needed access to their files.

"The FBI executed a search warrant issued by the United States District Court for the Southern District of Ohio regarding the IRC network that we host," the company said in its statement.

IRC (Internet Relay Chat) is a live chat system that allows users to create private discussion rooms. While IRC has a lengthy history of legitimate use, it is also a medium for discreet communication between hackers. CIT said the FBI was "investigating whether someone hosted on our network hacked and attacked someone else."

"After several hours of attempting to track down, inspect and audit the terabytes of data that we host, the FBI determined that it was more efficient (from their point of view) to remove all of our servers and transport them to the FBI local laboratories for inspection," the statement continued. "The FBI has assured us that as soon as the data has been safely copied and inspected, the equipment will be promptly returned. Unfortunately, the FBI has not been able to tell us when they will be completed with their inspection."

The seizure isn't standard procedure, and there's no way to know exactly what prompted it. CIT's account suggests the FBI may have lost patience with the process. The IRC-focused nature of CIT's business may also have been a factor.

But if you're a data center operator, you want to avoid any scenario in which the FBI gets impatient and starts hauling away your servers. Just one more item on the contingency planning checklist for the times in which we live.

Revenue, Profits Up at Rackspace

SAN ANTONIO - Rackspace Managed Hosting achieved strong company growth in 2003 with revenue increasing 48 percent and profits before taxes growing 134 percent over 2002. Leading the managed hosting industry's resurgence, Rackspace finished the year with a record fourth quarter, growing 13 percent sequentially and delivering an annualized revenue run rate of $70 million. Read the full release ...

RCN to File Chapter 11

PRINCETON, N.J. - Struggling cable company RCN Corp. said it will file for bankruptcy as part of a strategy to attract new investors and stay in the business of bundling cable television, Internet and telephone service. "We anticipate filing Chapter 11 in order to consummate a deal," Barak Bar-Cohen, an RCN spokesman, said Tuesday. He couldn't say when the company might file. Managers of Princeton-based RCN hope to swap $1.7 billion in debt for a share in the company, Bar-Cohen said. Read the full story ...

Terremark Faces Cash Crunch

Terremark Worldwide is once again facing a cash crunch. Despite an increased customer count and stronger revenues, the company is no closer to breaking even than it was last August, when CEO Manny Medina confidently predicted the company would be cash-flow positive by the close of 2003.

Instead, Terremark is once again seeking financing. As of Jan. 31, the Miami data center services company had just $2.1 million in cash remaining, and is losing $1 million a month on its operations. More than $23 million in obligations will come due this year.

"Currently, we do not have the cash to meet these obligations," Terremark said in its SEC filing. "We further anticipate that revenues will not be sufficient to make principal payments on debt maturing within one year. ... We plan to fund our business by increasing revenues and cash collections from customers and selling additional debt or equity securities."

An immediate concern will be meeting scheduled payments totalling $3.8 million that come due April 1 on unsecured notes, payable to SBP Investments, Inc., Caerulea Ltd. and Slivovitz Design Limited.

Terremark has survived many previous funding challenges, displaying innovation and resiliency in attracting investment. The current cash crunch follows the most successful year yet for Terremark's NAP of the Americas in Miami, which grew from 63 to 133 customers, signing new data center clients including InterNap, Hostopia, SAVVIS and the Department of Defense's US Southern Command.

Last summer, Medina confidently predicted big changes in the bottom line by the end of 2003. "We've never been in a better position," Medina told CarrierHotels at the time. "We are projecting cash-flow positive by the end of the year."

The income numbers are moving in the right direction, as Terremark's quarterly data center revenue has grown from $2.9 million to $4.6 million in the past four quarters. But its monthly operating loss has shown little improvement, narrowing from $1.4 million in June to the current $1 million. Last June 30 Terremark said it needed at least $2 million a month in new revenue to break even. That gap is now $1.6 million a month.

The company's cash position would have been more difficult if not for an $800,000 sale of preferred stock on Jan. 20. As of Dec. 31, Terremark owed $566,000 related to a lease, and $792,000 on its 2002 property taxes, but has since negotiated structured payment plans on those debts. The company is also negotiating an extension with Total Bank, which it owes $367,000.

From an operational perspective, Terremark will need at least $3 million to build out the third floor of the Technology Center of the Americas, which it has leased to expand the NAP of the Americas.

Terremark's loss from operations was $4.9 million for the quarter ended Dec. 31, compared to a loss of $6.7 million for the previous quarter.

Those numbers might make it difficult to raise funds. But as Medina noted last year, Terremark has had strong support. "In our case, we forgot about Wall Street," said Medina. "We have an ability to attract investors who've been with us for a long time. With these investors, you can take the time to educate them about the opportunity, and have the confidence to share the financial information about your operation."

Du Pont Buys Centers from SAVVIS

DuPont Fabros Development will pay $52 million to buy five former Cable & Wireless data centers from SAVVIS Communications, which has acquired C&W's U.S. hosting operation.

The deal, which is structured as a sale-leaseback, includes three data centers and an office building in Santa Clara, Calif. and an additional data center in El Segundo, Calif. near Los Angeles.

Du Pont Fabros "will take ownership of the facilities, and SAVVIS will continue to manage them," said SAVVIS spokesman Carter Cromley, which is consistent with the company's approach of not owning its data centers. Last year SAVVIS sold its St. Louis-area data center to Reuters for $35 million in another sale-leaseback deal.

The other 10 data centers operated by Cable & Wireless were all leased, and SAVVIS has assumed the leases on those properties, Cromley said.

Du Pont Fabros was one of Cable & Wireless' largest landlords, and will now play a similar role for SAVVIS. In 2000, Exodus Communications leased 650,000 square feet at Du Pont Fabros' Ashburn Corporate Center development in Loudon, Va. After filing for bankruptcy a year later, Exodus reduced its lease to 185,000 square feet of completed data center space at the site. Exodus' assets were later purchased by Cable & Wireless.

Du Pont Fabros, a Washinton, D.C.-based real estate investment firm, already owns one former Exodus data center in El Segundo, as well as a large data center in Reston, Va. that it purchased from MFN/AboveNet for $23 million in a bankruptcy sale last year. Google has leased 30,000 square feet of space in the Reston site. Du Pont Fabros also owns a portfolio of office properties located near the White House in downtown Washington.

SAVVIS Closes on CWA Funding

SAVVIS Communications said today that it has begun managing the former U.S. hosting operation of Cable & Wireless, and expects to complete the transaction in early March, once the deal gets final approval from regulators.

SAVVIS also said it had closed on $252 million in financing for the deal, raising $200 million through the sale of subordinated debt, and another $52 million through the sale of surplus data center properties to Du Pont Fabros Development. The company said it had placed $150 million in escrow to fund the Cable & Wireless purchase, and now has $100 million in working capital.

SAVVIS outbid six other suitors in a Jan. 23 bankruptcy court auction for the assets of Cable & Wireless America (CWA), agreeing to pay $155 million for C&W's American customers and data centers. Cable & Wireless placed CWA in Chapter 11 bankruptcy protection as part of a deal to exit the US hosting market.

The five-year subordinated notes, which pay a minimum of 12.5 percent interest, were purchased by existing investors Welsh, Carson, Anderson & Stowe and Bear Stearns' Constellation Ventures, along with new investors from Oak Hill Special Opportunities Fund.

"The $252 million in funding we have arranged provides SAVVIS with approximately $100 million in working capital to successfully integrate the companies and continue to provide outstanding service to the CWA customer base," said Rob McCormick, Chairman and Chief Executive Officer of SAVVIS. "SAVVIS is also very excited about adding Oak Hill Special Opportunities Fund and DuPont Fabros to our financing group, further demonstrating continued support of SAVVIS' virtualized utility platform, which is delivering high value managed services with industry leading reliability."

"We believe SAVVIS' business model and value added services will enable it to continue to excel in the evolving telecommunications industry," said Glenn R. August, Managing Partner of Oak Hill Special Opportunities Fund. "The addition of the Cable & Wireless network and hosting assets drives SAVVIS to an even larger scale and establishes it as a leading provider of managed IP communications and computing services. We are pleased to enter into this transaction with SAVVIS."

Zombies Mean Business

The virus-laden e-mails have slowed, but the legacy of MyDoom lives on in an army of 50,000 or more compromised computers that remain connected to the Internet. Many of these machines belong to home users on cable modem or DSL connections who either don't know or don't care that their machine is infected. The widely-publicized backdoor installed by MyDoom has made this army of "zombies" a playground for hackers and spammers, who are deploying all manner of malware in attempts to harness these machines for their own ends.

Why should data service center providers care? These zombies represent a huge and probably permanent platform for Internet crime and mischief that will create problems for you or your customers. Compromised machines being managed by hackers are the driving force behind the huge increase in Spam, creating a distributed network of unwitting mail servers.

As demonstrated in the attacks on the SCO Group web site, the zombie network is also a launchpad for Distributed Denial of Service attacks. The attacks on SCO and Microsoft aren't the real reason to worry. The more worrisome model is the use of threatened DDoS attacks as an extortion tool against Internet gaming sites, several of which have been knocked offline after refusing warnings to pay up or be attacked.

It's only a matter of time before similar tactics are used to target e-commerce providers, retailers or any business for whom downtime means a financial setback. Few are likely to relent to such threats. Their alternative is to find better ways to defend their web sites through additional servers, load balancing or content distribution networks.

Security has been a major selling point for many service providers, driving a number of deals and partnerships between hosting companies and managed service providers. The rising tide of Spam and DDoS attacks underscores the value these services will represent going forward.

The zombies mean business, both in their intent and in the likelihood that customers will take a harder look at security solutions available from data center service providers.

Ellen Hancock Joins EDS Board

PLANO, Texas -- EDS today announced it has elected longtime IT industry leader Ellen M. Hancock to its board of directors, effective February 16, 2004. Hancock, 60, most recently served as chief executive officer of Exodus Communications from 1998 to 2001 and added the title of chairman in 2000. Prior to Exodus, Hancock served as executive vice president of research and development and chief technology officer for Apple Computer, where she was responsible for the company's research, quality, networking software development and technical strategy. Read the full story ...

Equinix Offering Nets $75M

Equinix said yesterday that it raised $75 million through the sale of convertible debt, and used $30 million of the proceeds to retire the remainder of its high-yield notes. The Internet exchange operator also plans to pay down its senior credit facility and two other loans.

Equinix said the purchasers of the new debt have 30 days to decide if they'd like to purchase an additional $11.25 million of the issue.

"This offering allows Equinix to significantly reduce our annual interest obligations and further strengthen our financial position as it completes our balance sheet restructuring efforts,” said Peter Van Camp, CEO of Equinix.

Equinix shares closed at $31.01 in trading on the NASDAQ exchange, up 59 cents on the day. The company is benefitting from a sustained program to pay down its debt and a flurry of deals with blue-chip customers.

Equinix has nine US data centers spanning 855,000 square feet. Seven of those centers are cash-flow positive. The company has 275 workers, and a customer list that includes IBM, Google, Sony Online, General Electric, Electronic Arts, Yahoo!, and Microsoft.

Bulova to Host With NaviSite

ANDOVER, Mass.-- NaviSite, Inc., a leading provider of outsourced hosting, application management, content distribution, messaging and infrastructure management services, today announced that Bulova, the New York-based provider of precision clocks and watches, has chosen NaviSite to develop and manage its new Web site, www.bulova.com. Its second-generation Web site, Bulova.com is a feature rich and customer friendly portal that represents the company's brand on the Web. Read the full release ...

T-Systems Interconnects at telx

NEW YORK, NY - T-Systems’ carriers’ carrier division, International Carrier Sales & Solutions (ICSS) has hooked up to New York’s premier interconnection facility, telx, to support its business in the North American wholesale telecoms market. The telx “SuperNode”sm provides T-Systems access to a robust menu of local exchange and long distance carriers, peering partners and other global network providers—all available to interconnect through telx quickly and effectively without expensive local loop charges. Read the full release ...

Data Return Hosts Fandango

Data Return, LLC, a leading tier-one provider of complex managed hosting, announced today that it has been chosen by Fandango, Inc., the nation’s largest online and phone movie ticketing service, to provide infrastructure and managed hosting services in support of the company’s core online business. Read the full release ...

Deleveraging (Cont.)

As funding becomes more available, data center providers are raising money to wipe out debt - or at least shrink their payments. The latest providers to take this step are FiberNet and Equinix, two companies that have made deleveraging their balance sheet a priority.

Equinix said this week said it will sell between $75 million and $87 million in convertible debt, and use the proceeds to pay off its senior credit facility and two other loans, with the balance used for working capital. With its stock trading at nearly$30 a share, Equinix is benefitting from a sustained program to pay down its debt and a flurry of deals with blue-chip customers.

On Monday FiberNet issued $8 million in stock and warrants, and will use it to pay down $5.5 million of its senior credit facility.

Equinix and FiberNet are two of the survivors, and one key to their success has been debt management. In the fall of 2002, FiberNet and Equinix each owed nearly $100 million on their senior credit lines. After its $5.5 million payment, FiberNet will owe just $16 million. Equinix has $35 million outstanding on its senior credit line prior to the new funding, meaning it can pay the entire balance if it chooses.

The two companies' deleveraging strategies have included complex deals and recapitalizations, the kind where reading the press releases and SEC filings can make your brain hurt. But it's paid off, and is likely to pay additional dividends as the industry recovery picks up steam.

Redundant Seeking Buyers

Business continuity provider Redundant Networks has laid off much of its staff and is seeking to sell its two data centers, citing the enterprise IT budget crunch.

"Last week we took some steps to cut back our operations considerably," said Redundant COO and general manager Janice Fetzer. "We're trying to get down to bare bones to maintain operations for our customers, and we're talking to some acquisition prospects."

"We're not looking for a company acquisition anymore," said Fetzer. "We're looking for acquirers who would be interested in a site acquisition."

The company has a 13,000 square foot data center in its home base of Reno, Nevada, and last year acquired a 15,000 square foot data center in Raleigh, N.C. previously operated by Relera.

Launched in December 2001, Redundant targeted the enterprise market with disaster recovery and high-availability colo services designed to meet regulatory standards including HIPAA and Gramm-Leach-Bliley. The company targeted high-tech communities outside major cities.

"We went after a quality product scenario," said Fetzer, who brought experience from Exodus, where she was VP of real estate and construction. "We became a quality plug and play solution. But these services are kind of a discretionary spending item right now, and discretionary spending in this economy is not at the top of everyone's list."

Fetzer notes that while the economy and industry conditions are both improving, "we don't see it improving enough in the next two to three quarters that it would have changed our operational picture."

She said prospects have been impressed with the company and its services, but are being deliberate in their decisions and investment. "The pipelines we had were just awesome, and that can continue on with a new owner," said Fetzer. "We've got great customers. It's just an ownership transition."

Verio to Host GuardianInvestor.com

ENGLEWOOD, Colo. - Verio, a subsidiary of NTT Communications (NTT Com) and a leader in global IP solutions, today announced that Guardian Investor Services LLC, an indirect wholly owned subsidiary of The Guardian Life Insurance Company of America, has selected NTT/VERIO PowerPlatform managed hosting services for the launch of its new site GuardianInvestor.com. The company also tapped Verio for its Custom Web Solutions (CWS) to assist with site assessment, design and incorporation of new site features to ensure a positive customer experience for Guardian Investor Services' online business. Read the full release ...

Key New Customers for Terremark

MIAMI -Terremark Worldwide, Inc. a leading designer, builder and operator of integrated Tier-1 Network Access Points (NAPs) and best-in-class network services, announced today that it has signed contracts with new customers and existing customers to expand their relationship with Terremark. The new customers include BellSouth MNS, Inc., Cable & Wireless USA, and Yahoo!. Read the full release ...

Conley Named New CEO at Verio

ENGLEWOOD, Colo. - Verio, a wholly owned subsidiary of NTT Communications and leader in global IP solutions, today announced that its Board of Directors has named Gregory A. Conley as chief executive officer. Conley succeeds Justin Jaschke, who founded the company in 1996 and led Verio to become one of the largest domain-based Web hosting providers in the world. Jaschke subsequently presided over Verio's successful public offering, and a strategic acquisition by NTT Communications in September 2000 to establish one of the world's leading IP services companies. He will remain with the company in an advisory capacity, working with Conley, who takes over as CEO effective Feb. 9. Read the full release ...

Switch & Data: $70M in '03 Revenue

Colocation and interconnection provider Switch and Data today reported revenues for 2003 of $70.2 million, a 75 percent increase from 2002.

The Tampa-based company also reported revenues of $19.6 million for the quarter ended Dec. 31, and stated that EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization ) increased more than 600 percent for the quarter and 1,800 percent for the year.

During the fourth quarter, Switch and Data added 30 new customers to its interconnection and colocation facilities, bringing its total customer base to 480. The company also said it now has a total of 9,730 interconnections between customers.

"During 2003, Switch and Data grew the business and solidified our leadership in the colocation and interconnection business," said Patricia Higgins, Switch and Data's President and CEO. "We have continued, quarter over quarter, to increase our revenues, while positioning ourselves to broaden our enterprise market presence.

"I am especially pleased with our progress in capturing market share from our competitors," Higgins added. "Our strategy is to grow the business both organically and through acquisitions. I anticipate that we will see great activity on these initiatives during 2004."

Switch and Data recently acquired Philadelphia-area colo provider MeridianTelesis, and bought the PAIX interconnection business for $40 million in a bankruptcy deal last year.

Switch and Data said its fourth quarter accomplishments included establishing a new regional Internet exchange in Philadelphia, and expanding of its MetroPAIX Layer 2 public peering fabric into its San Jose, Calif. facility. It also completed a strategic VoIP peering and facilities partnership with PointOne, and appointed Kathleen Early and Art Matin to its bBoard of Directors.

Switch and Data provides neutral interconnection and colocation services to network centric enterprises and service providers.

Collocation Solutions Buys COMDEPOT

In a deal combining Dallas-based providers, Collocation Solutions has acquired COMDEPOT, L.L.C., which provides managed network services, the two companies said today.

The COMDEPOT business will operate as a subsidiary of Collocation Solutions and will be based at the Dallas Infomart, the Dallas carrier hotel housing Collocation Solutions' primary datacenter. COMDEPOT founders Don Purner and Steve Fahle will continue with the company.

The deal is the latest in a series of mergers and partnerships between hosting and infrastructure companies and providers delivering specialized managed services. COMDEPOT's areas of expertise include integrating multi-carrier environments, virtual network, security, and technology services.

"We have made this investment in response to our corporate clients’ requirements and to leverage the significant network presence within our carrier-neutral data centers," said Jim deVenny, CEO of Collocation Solutions. "This combination of COMDEPOT’s services and our robust meet-me-rooms gives us the on-net capabilities required to deliver reliable, value-added network services to the enterprise.

"This investment in COMDEPOT will enable the company to take advantage of these assets both inside and outside the data center environment," deVenny added. "These services will greatly enhance enterprise networks while reducing overall communications and technology costs.”

"Our business has been focused on delivering industry-leading 'On Demand' managed network solutions and achieving high levels of customer satisfaction," said Fahle. "We now have the added support of a strong company that demonstrates an equal commitment to these same business principles that will help us take our company to the next level."

Dallas-based Collocation Solutions is a carrier-neutral Internet infrastructure provider, with two locations in Dallas and additinal sites in Austin and Las Vegas.

Report: 111 Eighth Avenue Sold

Taconic Partners will sell 111 Eighth Avenue, one of the premier carrier hotels in Manhattan, to the German firm Jamestown for $775 million, according to media reports.

The 2.8 million square foot 111 Eighth is the third-largest building in New York City, occupying a full square block between Eighth and Ninth Avenues, and 15th and 16th Streets. It is more than 90 percent occupied, with a tenant list including MCI, Sprint, Level 3, Qwest, NTT, XO Communications, Cable & Wireless and Switch and Data.

Jamestown will reportedly acquire 75 percent of the property, with the New York State Common Retirement Fund holding the remaining 25 percent interest while Taconic continues as the property manager. About $500 million of financing for the deal was provided through Greenwich Capital.

Taconic acquired 111 Eighth Avenue in January 1998, and redeveloped the property to attract office and telecom tenants, installing mission-critical infrastructure.

Taconic Investment Partners is a real estate investment company founded by Paul Pariser and Charles Bendit that specializes in office and multifamily properties. Taconic has acquired 8.1 million square feet of office property, of which it has redeveloped more than 5.5 million square feet in New York City, Chicago, Atlanta and Washington, DC.

Twenty-year-old Jamestown is a closed-end fund that has been investing significantly since 1993, focusing on Class A, trophy CBD office and retail properties in major cities.

Inflow Phoenix is EBITDA-Positive

PHOENIX, AZ - Today, Inflow Inc., a leading provider of managed IT outsourcing solutions to companies with critical applications, announced that its Phoenix, Arizona Internet Data Center has achieved EBITDA positive status. Inflow-Phoenix is the eleventh Inflow market to reach EBITDA positive, to date. EBITDA status excludes corporate overhead not allocated to individual markets.
Read the full release ...

Equinix to Manage Hallmark Infrastructure

FOSTER CITY, CA - Equinix, Inc. announced that Hallmark Cards, Inc. has moved the infrastructure for the company's Hallmark.com e-commerce operations to Equinix's Silicon Valley Internet Business Exchange center. The move enables Hallmark to leverage the reliability and redundancy benefits of Equinix's neutral Internet hub while reducing network interconnection costs and increasing end-user performance. The aggregation of network service providers operating within Equinix's center also provides Hallmark with the operational flexibility to adjust to seasonal spikes in its online business. Read the full release ...