Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Internap Network Services Corporation -- Ignore unavailable to you. Want to Upgrade?

To: dawgfan2000 who wrote (711)	1/19/2004 7:21:58 PM
From: Curt Whitaker	Read Replies (1) \| Respond to of 1011

It's very likely they want the funds to acquire companies in targeted areas of expansion (per their SEC filings) like Europe and Asia. As some have calculated, the average revenue per client is only around $9.5K per month or so, which is paltry for Fortune 500 companies. Look for that metric to rise sharply once viability is no longer an issue (FCF). Big companies who have been using other providers along with INAP will have the evidence needed to drop the other "backup" providers. It will rise further with VOIP penetration. After this dilution, the balance sheet will be pretty clean, FCF, and clear sailing ahead, IMO.

To: dawgfan2000 who wrote (711)	1/22/2004 2:34:51 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 1011

Sales revenue has been VERY flat the last 5 quarters while customer growth has been over 30%. IMO, some thing is not adding up yet. I am long and looking fro some more bottom line revenue growth evidence to reaffirm my holding at this time. One of the major forces acting on INAP's revenues has been a general trend of declining bandwidth prices. This means that INAP can have significant expansion in the number of customers and the amount of traffic they handle but not show substantial revenue growth. The place to measure their progress is not so much in revenues as in their direct margin (the difference between what they receive from customers and what they pay for access to the Internet backbones for carrying traffic). This metric has shown significant improvement. Though many like to look upon revenues as "the" indicator, IMO it is not the best indicator for understanding INAP. It misses two key features of the INAP story: 1) INAP has a recurring revenue model that receives ongoing monthly revenues from their customers. This increases the cash flow and the value they receive from signing new customers, since they receive revenues many times compared with a one-time product sale. Think of INAP as an Internet utility providing significant additional value to its customers and with an opportunity to upsell new services to existing customers. If they are able to handle increased business for a growing number of customers at lower cost, their profitability increases even if revenues remain relatively flat. 2) INAP's high (and improving) margins and generally declining capex requirements. INAP has had a high level of fixed investment to set up its PNAP network. The amortization and depreciation expenses have resulted in continuing operating losses even as operating cash flow has improved to the point of realizing free cash flow. This is similar to cable companies, which have very high initial capital expenses followed by predictable improvement over time as the need for additional capex diminishes and the A&D expenses come off the income statement. One small point about languaging. "Top line" is used to refer to revenues. "Bottom line" refers to net earnings (or losses) after expenses are subtracted from revenues. IMO, the key places to look for INAP's growth are the number of new customers being added (and the size/quality of those customers -- admittedly harder to determine), direct margin, and bottom line earnings growth. If you watch the progress on the bottom line, you can see a clear trend toward profitability.