By Biswarup Gooptu
BANGALORE (Reuters) -
Shares of Internap Network Services
Corp fell to their 52-week low on Wednesday, a day after the
Internet service provider said it will have to refund some
customers of VitalStream Holdings, which it acquired last year,
for service outages.
The company said on Tuesday it expects a $1 million to $2
million increase in 2007 sales return allowance and will delay
the filing of its annual report.
The company's content delivery network (CDN) segment, which
it acquired as part of its deal with VitalStream, had been hit
by outages leading to customer requests for credits, according
to Merriman Curhan Ford analyst Colby Synesael.
"The company's customers wanted credits between $1 million
and $2 million in the CDN segment in 2007, that had been booked
as revenue, and now the company has to say that this isn't
revenue anymore and will have to put it in the allowance
basket."
Many customers were using VitalStream's portal to inform
Internap about the outages and credit requests, which Internap
did not discover until recently when it began to contact
customers for late payment, the analyst said.
Synesael downgraded the stock to "neutral" from "buy,"
saying the company is expected to reduce its 2008 outlook
following the disappointing performance at the CDN segment.
According to the analyst, Internap's CDN customer base in
2008 is going to be lower than the company's prior
expectations.
In February, the company had posted fourth-quarter earnings
of 13 cents a share on revenue of $63 million.
The Atlanta, Georgia-based company's shares, which had
touched an intra-day low of $3.95, were trading down 34 percent
at $4.04 in afternoon trade. The stock was one of the biggest
losers on Nasdaq.
(Editing by Deepak Kannan)
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