SAVVIS Announces New Operating Plan; Streamlined Cost Structure and Higher Profit Margins on Better-Balanced Revenue Result in EBITDA Improvements of 60%

Business Wire, July 9, 2001

Business Editors

HERNDON, Va.--(BUSINESS WIRE)--July 9, 2001

SAVVIS Communications Corporation (NASDAQ: SVVS), a leading global network services provider, today unveiled a new operating plan to reduce its cost structure and increase profit margins. The cost reduction plan includes capitalizing on shifts in market pricing to reduce SAVVIS' data communications costs, as well as reducing its work force by approximately 15%. SAVVIS also announced that it is working on a network services agreement with the bidders for the remaining assets of Bridge Information Systems ("Bridge"). These developments will diversify the Company's customer base and improve overall operating performance. As a result, the company projects an EBITDA improvement of approximately 60% by year-end 2001.

Revenue Improvement Through More Diversified Customer Base and a Shift to Higher Margin Products

When complete, the sale of the Bridge assets will result in a better-balanced, financially stable customer base for SAVVIS. A substantial portion of the Bridge business is under contract to be sold to Reuters and it is expected that this transaction will close in late Q3. In addition, Bridge is also in active discussions with a number of parties for the sale of the remaining assets, which include Telerate worldwide, as well as Bridge's client base in Europe and Asia. SAVVIS has already provided these bidders with proposals for continuing service to the Bridge customer base. SAVVIS estimates the combined revenue it could receive from Reuters and the buyer(s) of Bridge's remaining assets will be $14-16 million per month, which is roughly equal to the revenue it received from Bridge. Bridge's announcement of the winner is expected in July.

"Since this time last year, the quality of SAVVIS' revenue has dramatically improved," said Rob McCormick, chairman and chief executive officer of SAVVIS. "In the near future, our customer base will be better balanced, with no single customer accounting for the majority of our revenue. Reuters and the other bidders are strong, financially stable companies, and we expect that they will aggressively capitalize on Bridge's market position." McCormick continued, "Also, SAVVIS' revenue is seeing marked improvement because of the rapid growth of our higher-margin Intelligent IP networkingSM services. These services, which were recently recognized as Product of the Year by Network Magazine, now account for over 60% of our new sales from zero a year ago."

Network Expansion Now Completed; Operating Plan Revised to Capitalize on Market Trends

With its network expansion and data center build-out now completed, SAVVIS anticipates no significant capital expenditure for the foreseeable future. As a result of the decrease in long haul market pricing, SAVVIS has decided to postpone its deployment of dark fiber and will pursue lit fiber to meet its backbone capacity requirements. The company will reduce data communications costs, including local loop and global backbone costs, as well as transit costs for Internet peering. Access and backbone prices have declined dramatically, and SAVVIS will capitalize on this market shift. Further, SAVVIS is implementing a reduction in its work force of approximately 15%. The reduction will be primarily focused on operational and engineering employees associated with the completion of the network build-out.

"To meet our business plan objectives and support our customer growth, SAVVIS' attention will be on maintaining and expanding its sales force, along with continual improvement in our world-class customer support and service," said Jack Finlayson, president and chief operating officer of SAVVIS.

Less Funding Now Required

As a result of these expected developments, SAVVIS predicts that it will save over $40 million annually, and its EBITDA will improve by 60%, from a loss of $8 million per month to $3 million per month by year-end 2001. SAVVIS would require approximately $80 million to fully fund its business plan.

Commenting on the revised plan, David Frear, chief financial officer of SAVVIS, said, "We have re-evaluated the company's operating plan in light of SAVVIS' successful network build-out, rapid sales of our Intelligent IP product, and dramatic reduction in infrastructure costs. We will exit this year needing 25% further growth in sales to achieve EBITDA break-even, which we expect to reach in the first half of 2002."

Guidance

With the cost-cutting plan in place and the sale of Bridge's assets about to conclude, SAVVIS is now in a position to offer guidance.

For the second quarter of 2001, SAVVIS expects to deliver earnings before restructuring charges of about ($56.5) million and earnings per share before restructuring charges of ($0.60), an improvement of 2 cents per share over the first quarter of 2001. This earnings per share performance exceeds analysts' consensus estimates. The company anticipates reporting a slight decrease in total revenues from $59.7 million to $58.5 million, reflecting a $3 million decline in Bridge revenues, which was substantially offset by a $2 million (14%) increase in non-Bridge revenues. Also, SAVVIS expects to report non-cash restructuring charges in the second quarter due to asset impairment and severance costs. These will total approximately $100 million, of which $40 million is a result of discontinuing SAVVIS' wireless access build-out and $40 million relates to the postponement of the dark fiber rollout. Final results for the second quarter are expected to be reported at the end of July.