ST. LOUIS, MO – June 29, 2007 – SAVVIS, Inc. (Nasdaq: SVVS), a global leader in IT infrastructure services for business applications, today announced it has sold assets in two adjacent data centers in Santa Clara, CA to Microsoft (Nasdaq: MSFT) for $200 million, including $190 million cash and forgiveness of approximately $10 million of previously-advanced revenue. The $200 million consideration also reflects early termination of service contracts between SAVVIS and Microsoft related to those data centers. Microsoft is the sole customer in both facilities, which together comprise approximately 250,000 square feet of gross raised-floor space, and useable square feet under typical business conditions of approximately 160,000 square feet.
SAVVIS CEO Phil Koen said, “This is a great transaction for both SAVVIS and Microsoft, a valued – and continuing – SAVVIS customer. Microsoft gets full control of two data centers they already occupy. SAVVIS can redeploy the proceeds into investments in higher-margin, higher-growth assets. As we continue to focus on providing IT infrastructure as a service, we are exploring investment opportunities including further network capabilities and expansion of our data center footprint with top-quality facilities in high-demand markets.”
Microsoft has been the sole customer in the data centers under the terms of a SAVVIS colocation contract due to expire at the end of 2010. That contract generated approximately $16.5 million of revenue and approximately $8 million of Adjusted EBITDA* for the first six months of 2007, which includes approximately $1.5 million of non-cash contribution primarily related to amortization of advanced billings that were being recognized over the remaining contract life.
“The acquisition of these assets is an important part of our vision for a globally scaled data center infrastructure that will keep pace with user demand for innovative online services,” said Arne Josefsberg, general manager, infrastructure services, Microsoft. “Working with SAVVIS to complete this transaction will allow us to gain energy and operational efficiencies, helping us continue to run some of the largest services in the world. We appreciate our long relationship with SAVVIS and look forward to working with them in the future.”
Power costs for the two data centers were excluded from SAVVIS’ revenue and cost as Microsoft paid for power directly. Typically, SAVVIS includes the power costs for colocation customers as part of their overall billing. As part of the sale, the service contract with Microsoft for these two facilities terminates as of the end of June 2007. Commenting on the sale, SAVVIS Chief Financial Officer Jeff Von Deylen said, “The sale of the assets related to these two data centers is very much in line with SAVVIS’ strategic focus on managed IT infrastructure services. We have exited a contract that provided us with only modest growth from contractual price escalators, and obtained proceeds that will fund ongoing and future business expansion that we expect will produce higher growth. Over the next twelve months we expect to reinvest the proceeds in initiatives including selected data center expansions and potential network enhancements. As a result of these investments, we would expect to exceed the lost annualized adjusted EBITDA from this transaction within 24 months. We will announce these initiatives as we finalize plans over the next few quarters.”
As a result of the sale, SAVVIS management’s current expectations for 2007 financial results include:
•Total revenue in a range of $805-820 million, compared to $820-835 million previously anticipated, and
•Adjusted EBITDA in a range of $155-165 million, compared to $160-170 million previously anticipated.
Investor Conference Call
SAVVIS will webcast an investor conference call on Monday, July 2, 2007, at 8:00 am EDT. Both the webcast and supporting presentation will be available at www.savvis.net on the Investor Relations page. A live conference call will also be available at +1 703-639-1169 and 866-244-4517 (in North America, toll free). Recorded replays will be available on the website for six months, and by telephone for one week, at +1 703-925-2533 and 888-266-2081 (in North America, toll free) with the access code 1107280.
* Adjusted EBITDA
“Adjusted EBITDA” represents income from operations before depreciation, amortization and accretion, gains or losses on sales of assets, and non-cash equity-based compensation. We have included information concerning Adjusted EBITDA because we believe that in our industry such information is a relevant measurement of a company's operating financial performance and liquidity. The calculation of Adjusted EBITDA is not specified by United States generally accepted accounting principles. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from SAVVIS’ expectations. Certain factors that could adversely affect actual results are set forth as risk factors described in SAVVIS’ SEC reports and filings, including its annual report on Form 10-K for the year ended December 31, 2006, and all subsequent filings. Those risk factors include, but are not limited to, variability in pricing for SAVVIS’ products, highly competitive markets, rapid evolution of technology, variability in the availability and terms of financing, uncertainties related to merger and acquisition activity, changes in our operating environment, and changes in regulatory environments. The forward-looking statements contained in this document speak only as of the date of publication, June 29, 2007. Subsequent events and developments may cause the company’s forward-looking statements to change, and the company will not undertake efforts to revise those forward-looking statements to reflect events after this date.
SAVVIS, Inc. (NASDAQ: SVVS) is a global leader in IT infrastructure services for business applications. With an IT services platform spanning North America, Europe, and Asia, SAVVIS is an industry leader in delivering secure, reliable, and scalable hosting, network, and application services. These solutions enable customers to focus on their core business while SAVVIS ensures the quality of their IT systems and operations. SAVVIS’ strategic approach combines virtualization technology, a global network and 22 data centers, and automated management and provisioning systems. For more information, please visit www.savvis.net.: