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Internap Network Services' CEO Discusses Q4 2010 Results - Earnings Call Transcript

On Slide 4, you can see quarterly revenue and segment margin trends in our two reporting units. Fourth quarter Data Center Services revenue increased for the second consecutive quarter to $31.7 million. On a year-over-year basis, Data Center Services revenue decreased $1.4 million as proactive churn outpaced underlying growth in our core Data Center Services.

Compared with the fourth quarter of 2009, Data Center segment profit rose 21% and margin increased 800 basis points. At the end of the fourth quarter, we had successfully exited the last contract associated with our proactive churn program. This initiative has had a significant benefit on our overall profitability. The strategic benefit is clear when we consider that Data Center segment profit has increased 34% or $3.1 million from the third quarter of 2009 through the fourth quarter of 2010 even though Data Center revenue has declined by $1.8 million.

While IP Services revenue declined in the fourth quarter, we remain confident in the long-term ability to drive top line growth from this business unit based on underlying metrics, including traffic, bookings and churn. We also continue to develop and deploy services that will drive incremental revenue and further reduce churn. IP Services segment margins remain healthy in the low 60 percentages. And we expect this to continue.

In the next several slides, we will provide some highlights for our full year 2010 results. Slide 5 provides a brief summary of our 2010 income statement metrics. Despite a 5% reduction in overall revenue, total segment profit increased 3% year-over-year and segment margin increased 360 basis points to 47.8%. This is particularly noteworthy when we consider that all of the profit improvement came from our Data Center Services business.

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