InterNAP: A Company with Backbone

Like all good businesses, InterNap was started out of frustration -- that is, the existing Net infrastructure. Anthony Naughtin, the CEO and co-founder, has spent years dealing with the bogged Internet infrastructure. This is also the case with Christopher D. Wheeler, a co-founder. Wheeler has spent 10 years architecting and implementing advanced TCP/IP networks. In fact, he created Cisco's OSPF and BGP4 routing protocols.

However, Naughtin and Wheeler did not want to create a new network (obviously, it would be hugely expensive). So the solution was to make the existing network faster. The result was a virtual Internet backbone, known as P-NAP (Private Network Access Point). Basically, the P-NAP directs customer data along the fastest paths on the various backbones of the Net (such as UUNet, Sprint, Digex, AT&T and so on).

Part of the P-NAP solution is old-fashioned capitalism. That is, InternNAP pays the backbone providers. It is this financial incentive that provides for a high-degree of quality of service.

For faster and more reliable Net services, customers are willing to pay InterNAP a premium. Customers include such heavies as WebTV, Datek Online, Mindspring and Amazon.com.

With the growth in its customer base, InterNAP has been growing its revenues nicely. They were $8.9 million in the prior quarter, which was up from $1.2 million in the same period a year ago. The sequential growth rate was 62%. In the past quarter, 92 new customers were added. In all, the company has 339 customers. The average monthly revenue per customers is increasing. It was $10,400 per customer, which was a 20% increase from the fourth quarter of 1999.

InterNAP is also growing via acquisition. Yesterday, the company announced it is purchasing CO Space, which is a leading co-location service provider (the price tag is $244 million). With the acquisition, InterNAP will provide a more complete solution to its clients (InterNAP will have 275,000 gross square feet of co-location space in 13 locations).

Although losses are still large, with $20.6 million in the last quarter, the company is aggressively building a strong infrastructure. There are 16 P-NAP facilities deployed already. With consolidation hitting the industry (such as with the purchase of Verio), the infrastructure of InterNAP should be very appealing indeed.