Paetec CEO Sees Cloud Propelling Co.'s Revenue Growth
May 23 2011 - 4:34PM
Dow Jones News
Paetec Corp. (PAET) is the latest company to bank on cloud
services to jumpstart its growth and share price.
The company, which delivers telephone and Internet services to
businesses through its network, said it would add 13 data centers
by the end of 2013 in a strong commitment to delivering cloud
services. Paetec Chief Executive Arunas Chesonis said he expects
the business to grow eightfold, to $400 million over the next five
years. As a result of the company's growth initiatives, he expects
to see 5% to 7% revenue growth over the same period.
"It's a good, solid goal," Chesonis said in an interview on
Monday.
Paetec has flown under the radar of Wall Street, thanks to a
combination of lackluster growth and a business where it is
overshadowed by larger peers AT&T Inc. (T) and Verizon
Communications Inc. (VZ). The company, which has carved out a niche
of serving medium-sized business customers, hopes the combination
of cloud services with its network infrastructure will draw new
customers and investors alike. It's one of hundreds of companies
looking to tie themselves to cloud services, seen as the next hot
trend in technology.
Over the past year, Paetec has lost more than a quarter of its
market capitalization as the company has shown minimal revenue
growth and continued losses. It currently fell 2.5%, to $3.93.
Chesonis said the recent consolidation in the data storage area
is proof that there is demand for a cloud services provider that
also runs a network backbone. Over the past few months, Verizon
acquired Terremark, Time Warner Cable Inc. (TWC) agreed to buy
NaviSite Inc. (NAVI), and CenturyLink Inc. (CTL) agreed to acquire
Savvis Inc. (SVVS).
He said the outage suffered by Amazon.com Inc. (AMZN) customers
last month resulted in companies flocking to providers with more of
a dependable track record.
"Amazon was a great ad for us," Chesonis said. "You have to be a
much smarter consumer of cloud services."
Given the explosion of growth in cloud services over the new few
years, Chesonis said he expects to easily meet his target if the
company maintains its market share. He added he believed the
forecast was modest, but wanted to stay conservative in case of
sudden spending downturns.
There is an opportunity to upgrade Paetec's existing base of
60,000 business customers to cloud services, Chesonis said. While a
third of sales come from the existing base, he expects that to grow
to half the revenue.
Paetec hopes to win over new customers through its ability to
offer more flexible contracts, better pricing and more support, he
said.
"We're not trying to beat (Verizon or AT&T), we are taking a
little piece of the top," Chesonis said, adding he expects Verizon
to take its time integrating its Terremark assets, allowing Paetec
to scoop up some business.
Beyond the cloud, Chesonis said he expects its two other growth
areas, managed services and services related to its fiber-optic
business, to double over the next five years.
-By Roger Cheng, Dow Jones Newswires; 212-416-2153;
roger.cheng@dowjones.com
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