March 26, 2002 -- From its founding in 1997, Switch and Data had ambitions for a far-ranging footprint, building data centers in 34 markets and planning expansion in many more.
It wasn't alone. But while expansion-minded competitors like COLO.COM and Relera have disappeared, Switch and Data survived the brutal market downturn, and is back in expansion mode with its recent purchase of PAIX.
Switch and Data says it turned EBITDA positive in December, and is now in the black (with free cash flow) following the PAIX deal.
CEO Patricia Higgins says the company's perseverance is a function of its early decisions.
"We have been extremely conservative in how we spent our money, and very efficient in how we build our facilities," said Higgins. "We were able to manage our costs when there was considerable churn in the marketplace."
Higgins said that Switch and Data's main early competitor, COLO.COM, spent more than $500 million to build 22 data centers, while Switch and Data built its first 27 facilities for about $180 million.
"Our sites were typically smaller in size, 20,000 to 25,000 square feet on average," she added. "We also built out the sites as customers signed contracts. That allowed us to not spend the capital to build out a site until we had the supporting business."
Meanwhile, some competitors were building out entire data centers on speculation, and staffing up to offer managed services to future customers. Both trends accelerated the cash burn rate for these providers.
Switch and Data also scaled back its buildout plans. At one point in 2000, then-CEO Stephen Kelly spoke of plans for a network of more than 90 data centers worldwide, including an ambitious European expansion.
"As we came to market, we built out prudently, but we also had some leases we decided not to build out," said Higgins, who succeeded Kelly in late 2000, having served as CIO of ALCOA and in senior management positions at Unisys, Verizon, Lucent and the Gartner Group.
Higgins said that Switch and Data's fortunes in 2002 bucked the industry trend.
"We acquired more new customers in 2002 than in any year in our history," said Higgins. "Since the fourth quarter of 2002 and into 2003, churn has fallen off dramatically."
Looking ahead, Switch and Data vice president of business development Tim Guarnieri believes business conditions will improve gradually.
"Over the next 12 to 18 months I see fairly steady and even growth," said Guarnieri. "But I don't know that you're ever going to see a 'hockey stick' again."