October 29, 2003
Savvis' Savvy Sale
Savvis Communications revealed this week that it lost $8.1 million on the sale of its Hazelwood, Mo. data center to Reuters back in May. The loss on the data center, which was disclosed in Savvis' third quarter earnings announcement, was interpreted by some as having contributed to a weaker performance for the company.
That may be true, if you''re only looking at the numbers. If you step back and take a look at the broader data center market, the sale price of Savvis' 100,000 square foot data center is far from a disaster. Reuters paid $35 million in cash, so when the loss is figured in, it means Savvis valued the facility on its books at $43.1 million.
By that math, Savvis sold the data center for about 81 percent of its valuation. I'd bet there are more than a few recent facility sellers who would be happy to have that kind of "loss."
DCML: Big Deal or Not?
Need another acronym to remember? Ready or not, here comes DCML, or Data Center Markup Language, which was unveiled last week amid a flurry of stories in the IT media. EDS and Opsware are among the prime movers in this intiative, which promises to "move utility computing from promise to reality." If you missed the coverage of the rollout,Serverwatch offers a user-friendly introduction to DCML and why it may matter. With the support of 25 high-tech companies, does DCML have enough critical mass to take off?
"Some pundits are pointing to the notably absent major players such as HP, IBM, Microsoft, and Sun," writes Doug Kaye of RDS Strategies. "And if DCML will help us manage the data center, where's Cisco? I'd track this effort, but don't take it seriously until you see the support of the folks who make the systems we put into our data centers."
This may take some time, according to Opsware chairman Marc Andreessen, who says DCML can be thought of as "HTML for the datacenter." Andreessen believes the major players will come on board as the technology proves itself. "To me, where [DCML] is right now is analogous to HTML and TCP/IP," Andreessen told InfoWorld. "Companies like IBM and Sun were not in favor of them originally but ended up adopting them and are now enthusiastic supporters."
When we last wrote about utility computing, the bottom line was that the hype was well ahead of both the reality and the demand. "The utility model is a megatrend," Hewlett Packard's Mark McKenna said at last year's IMN show. "Will utility computing get us out of this recession? No. Will utility computing be a major trend 10 years from now? Absolutely."
October 24, 2003
Where's Your Server?
How close a relationship do you have with your server? Data center professionals smile about "server huggers" - customers who like their equipment in a facility near their office for easy access. But as more and more IT outsourcing jobs move overseas to locales like India or the Phillippines, the issue of the physical location of servers is becoming more important to customers. NewsFactor reports that prospects are asking application server providers where their servers will be located.
The issue cuts two ways. US providers are finding that potential clients in overseas markets prefer that their server be local, rather than in North America. But the story also notes moves by IBM that "will make it easier for IBM to deploy its servers for on-demand, hosted services to offshore data locales, such as India."
If US companies aren't sensitive about where their server is located, that may change soon. We're entering an election year, and Americans are unhappy about the state of the economy and the job market. On complex issues, politicans often seek out convenient scapegoats that plug into their agendas. Expect the offshore outsourcing issue to become politicized soon.
If that happens, the location of one's servers and data centers may create "headline risk" for customers and prospects. If they haven't asked about it, they probably will soon.
October 21, 2003
Data Mirroring Advances
Real-time data mirroring is improving, making it faster and cheaper to store huge amounts of critical data at secondary sites, according to IBM, which is unveiling new remote backup products. That's good news on the cost front. But it might also attract notice in Washington, where the physical limitations of mirroring were an issue as federal regulators weighed guidelines on backup data centers for Wall Street firms. as well.
During discussions last year, regulators wanted backup centers to be hundreds of miles outside New York to ensure the markets could reopen quickly after a "regional disaster." The financial industry chafed at codifying a "safe" distance between centers. One of its arguments was that current technology didn't allow reliable real-time mirroring beyond 60 miles, making it untenable for the feds to recommend that facilities be further apart.
Of course, that was a convenient argument for the many financial firms with backup data centers in Manhattan, Brooklyn or nothern New Jersey. A mandate from DC on "geographic diversity" would have meant expensive relocations for these operations. The industry viewpoint won the day, and regulators' final white paper steered clear of including a recommended minimum distance between data centers.
In a perfect world, the issue would never come up again. In the real world, efforts to disaster-proof the American financial system are likely to be revisited often going forward. As mirroring technology improves, a key argument in favor of the status quo becomes less persuasive.
October 17, 2003
Infocrossing Raises $76M
The funding drought for the data center sector appears to be coming to an end. Just two days after Equinix announced plans to sell $150 million in common stock, New Jersey IT outsourcing provider Infocrossing today announced that it has secured $76.5 million in a private placement. The funds will be used to retire its Series A preferred stock and warrants. The four members of the company's board who were nominated by holders of the Series A issues will step down once the transaction is completed, the company said.
"Our new and existing shareholders have the opportunity to participate in the future of a financially stronger company," said Zach Lonstein, Chairman and Chief Executive Officer of Infocrossing. "We are very pleased to have reached this agreement with our preferred shareholders. This agreement, combined with the private placement, will substantially re-capitalize our balance sheet, simplify our income statement, and contribute to both our financial strength and profitability. Furthermore, both current and potential customers can gain confidence because we expect to generate both net income and positive cash flow. Consequently, we believe that our historic sales cycle may contract."
The $76.5 million is being raised through the sale of warrants to "accredited investors" in a private equity placement exempt from SEC reporting rules. The warrants will have an exercise price of $7.86 per share of common stock and expire in October 2008.
October 16, 2003
Stargate Center Sold
Cleveland ISP and hosting provider E-xpedient was the high bidder for the data center operation of Pittsburgh's Stargate.net in a bankruptcy court auction last week. E-xpedient will pay $2.9 million to acquire more than 7,000 commercial Internet access accounts and Stargate's data center, according to local media accounts. The deal gives E-xpedient a 25,000 square foot data center in Pittsburgh that Stargate purchased from Blue Cross of Western Pennsylvania in 2000.
Stargate was the largest ISP in the Pittsburgh area, at one time claiming 72,000 dial-up and DSL accounts. It filed for Chapter 11 protection in April after unsuccessful negotiations with a potential acquirer. At the time, Stargate CEO Marcus Ruscitto said the company was profitable, with $34 million in annual revenues, and characterized the filing as a tactic to restructure $22 million the company owed its bank lender, Fleet Bank.
In last week's bankruptcy auction, Stargate was sold off in three chunks for a total of $10 million. Earthlink purchased Stargate's residential ISP business for $6.5 million, while Pittsburgh area IT firm A.C. Coy Co. bid $535,000 for its professional services operation.
E-xpedient said it will continue the Stargate brand, which will function as a wholly-owned subsidiary of E-xpedient and "maintain a visible presence in the Pittsburgh and Erie markets." E-xpedient serves more than 29,000 business and residential customers in 18 major U.S. cities.
October 07, 2003
Blades Have Arrived
Sales of miniaturized blade servers reached $47 million in the first quarter of 2003, eclipsing the $43 million sold in all of 2003, according to new data from IDC in a Network World article documenting the momentum for blades in enterprise computing. Blade architecture also seems to be making inroads in government computing, where "blade PCs" offer enhanced security by moving the hard drive off the desktop and into the data center, according to Federal Computer Week.
What will this mean for the data center? Heat, and lots of it. The issue of "hot spots" in raised-floor data centers is not new, as we've devoted numerous stories to the topic here at CarrierHotels.com (see Temperature's Rising in the Data Center in Nov. 2002, Cooling Becoming A Hot Topic in April 2002 and Smaller Servers, Large Loads in July 2001 as reference points).
But until now much of the discussion has focused on the future, as the adoption of high-density blade computing has been slowed by sluggish IT spending and resistance to implementing new technologies. This is changing, as illustrated by the 1Q03 sales figures as well as a story in ComputerWorld that tells how even veteran facility designers like Johnson Controls have experienced problems with overheating. Included is a table that details blade configurations from five vendors, each cramming between 70 and 280 blades into a single 42U rack, creating power usage of between 9 and 15 kilowatts per rack.
That means it's also showtime for new approaches to cooling that seek to make more efficient use of chilled air or use water or refrigerants to cool the rack space, and design firms offering solutions for high-density environments. No doubt that "ripple effect" will be welcomed in those two areas.
October 01, 2003
Level 3 Going Shopping
CEO James Crowe says Level 3 is looking to buy distressed competitors, as the telecom giant seeks new revenue to offset sluggish growth in core markets. With about $1 billion in cash, Level 3 has "lots of opportunities to make acquisitions like the ones we have already made," Level 3 Chief Executive James Crowe told a Goldman Sachs conference yesterday.
What kind of deals make sense? Crowe said the ideal acquisition target would offer "largely the same services and are in largely the same geographic area so we can take advantage of some synergies." That's likely to further fuel speculation that Level 3 may have renewed interest in the US operations of Cable & Wireless, which wants to sell or close the hosting operations it purchased from Exodus and Digital Island.
Cable & Wireless may have fewer options on the table, as British media are reporting that a buyout effort by the US management team is having trouble obtaining financing.
But does a Level 3 deal for C&W's American operations make sense? C&W's US hosting operation is losing money and faces substantial lease obligations on data centers. When it acquired Genuity earlier this year, Level 3 quickly unloaded Genuity's money-losing hosting operation and underused data centers, flipping them to Computer Sciences Corporation. It seems unlikely that Level 3 would suddenly have an interest in acquiring similar hosting assets from C&W.
But Wall Street may be disappointed if Level 3 doesn't buy something soon. Crowe has been talking about bottom-fishing for distressed assets ever since Warren Buffett invested with the company in mid-2002. There's been no shortage of targets, but Level 3's biggest telecom acquisition to date has been Genuity. The company has raised expectations of a deal, and now needs to deliver one or face second-guessing about opportunities missed.