O.S.S. Capital's Oscar Schafer thinks that INAP's "legacy bandwidth-resale business" masks the growth rate of its data-center business (13% annually since 2010, with operating margins expanding 13% over the period).
Schafer thinks margins have further room to expand with new company-owned data centers currently at <60% utilization.
With the data-center ops now representing over 50% of revenue, Internap could be the target of a telco or IT services company. Historically, transactions have occurred at 10x EBITDA, while Schafer estimates Internap trades at <7x 2015 EBITDA.
Gamco Investors' Mario Gabelli chimes in that CEO Eric Cooney, "is terrific" and that his fund remains the company's largest shareholder.