PEER 1 Reports 12.1% Revenue Growth

• By David Hamilton, November 14, 2008

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(WEB HOST INDUSTRY REVIEW) -- Reporting its ninth consecutive quarter of growth, IT infrastructure provider PEER 1 Network Enterprises (www.peer1.com) has announced the results for the past three months with revenue at $23.5 million, up 12.1 percent from last quarter's $21 million.

According to the publicly traded Vancouver company's Thursday announcement, PEER 1 has reported a gross profit increase of 16.6 percent, resting at $10.5 million at the end of September. Operating income also rose 24.0 percent to $3.5 million from $2.8 million.

This quarter has been eventful for PEER 1. In early August, the company took over customer billing, ticketing and provisioning for its managed hosting customers from the a third party provider. By eliminating the middleman and consolidating these operations, PEER 1 was able to enhance its customers' experience by better identifying the trends affecting its customers, increasing responsiveness, and reducing the time-to-market for new products and services.

PEER 1 also entered into an agreement that will expand its leased data centre facility in Herndon, Virginia, adding 8,614 square feet and approximately 2,880 servers to its operations. Occupancy is scheduled to begin early next year.

"While a small percentage of our customers have started to feel the effects of the economic slowdown, overall we continue to see good demand for our core services," PEER 1 president and chief executive officer Fabio Banducci said in a statement. "PEER 1's strategic position, financial strength, and organizational flexibility will allow us to emerge from this period in an even stronger competitive position."

Compared to the same period in the previous year, managed and dedicated hosting revenues increased by 15.1 percent, colocation by 8.3 and bandwidth by 2.0.

With roughly 21 percent of PEER 1's overall revenue coming from Canadian operations, smaller than expected colocation business results were primarily due to the effect of foreign exchange on Canadian colocation revenues. PEER 1 notes, however, that its colocation growth may slow down as it needs time to builds more colocation space in key markets.

Last week, managed hosting services provider Rackspace (www.rackspace.com) held its second earnings call as a public company Wednesday to discuss its third quarter, which also ended at the end of September. Rackspace's net revenues for the quarter were $238.4 million, an increase of 5.8 percent from the second quarter of 2008 and up 44 percent from the same period in 2007. The company said its revenues were negatively impacted by the depreciation of the British pound, which affected Rackspace's UK profits.

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