Web site and application host NaviSite will miss second-quarter financial targets largely because it was forced to dump dozens of deadbeat dot-com customers.
For the three months ended Jan. 31, the Andover, Mass., company will lose between 52 cents and 55 cents per share on revenue of $27 million to $28 million. Analysts expected NaviSite to lose 42 cents per share.
Execs gave two familiar reasons for the dismal results. First, it terminated 45 customers, mostly Internet startups, for defaulting on bills. Second, it won fewer customers as companies pared information technology budgets.
Joel Rosen, NaviSite’s president and CEO, said the firm is “making appropriate adjustments and are on track to increase our mix of enterprise customers.”
In other words, it’s weaning itself from Internet clients in favor of large, grounded businesses. Approximately half of the 34 new customers NaviSite booked in the second quarter were large companies, up slightly from 48 percent in the previous quarter. Wins include Biogen, Blue Cross Blue Shield of New York and Carat Freeman.
NaviSite will also look to control costs. Earlier this month, it closed two offices and fired 44 employees, 7 percent of the workforce. The cuts, plus measures to reduce debt, should curb spending by $6 million to $8 million per quarter, starting in the fourth quarter.
The company will issue official second-quarter results March 8 and give guidance on future results. NaviSite is majority owned by CMGI , the Andover, Mass., Internet holding company (CMGI said it will hit its numbers as other operating companies offset NaviSite’s losses.)
Whether NaviSite’s belt-tightening and strategy shift will be enough to keep it from suffering the same fate as the companies it just cut off remains to be seen.
NaviSite released the outlook after markets closed. Thursday, the issue closed up 0.156, or 6 percent, to 2.812. At one point last year, the stock hit 164.938.
Colin C. Haley writes for Boston.internet.com, part of the internet.com news network.
