Cogent to double pace of connections

Having declared positive cash flow today for the first time in its eight-year history, Cogent Communications vowed to double the pace at which it connects buildings to its network this year.

The Ethernet service provider now plans to connect two new buildings to its network each week rather than one. Cogent added 22 buildings to its fiber network in the first quarter, giving it 1129 buildings in all. It expects to add a total of 100 this year.

Cogent expects revenue from on-net customers to grow 35% to 40% this year and 9% or 10% sequentially in the second quarter. On-net revenue grew nearly 11% sequentially in the first quarter to more than $33 million. The company’s overall revenue was up nearly 8% sequentially and nearly 27% from a year earlier to nearly $44 million in the first quarter.

Cogent promoted some of its best-performing sales people to managers during the quarter in order to strive toward its preferred ratio of seven sales representatives to one manager. As a result, the company ended the quarter with five fewer quota-bearing sales people (129). And the average productivity of its sales force dipped to 4.5 orders per month, though the company expects that number to rebound back to the target of 5 in the future. Cogent now has 140 sales representatives and plans to have 180 by year’s end.

The amount of traffic on Cogent’s network is now doubling annually, while Internet traffic is growing about 70% per year. Much of the traffic growth on Cogent’s network is coming from the rising popularity of video-sharing Web sites such as YouTube, which now depends on Cogent for more than 60 Gb/s of network capacity. These trends should continue as others follow YouTube’s lead, Cogent said.

“The ultimate business model for video distribution over Internet is still being formed,” said Dave Schaeffer, Cogent’s chief executive officer.

The company is expanding its network in Italy and the Netherlands and plans to branch out from Los Angeles to Las Vegas. It will also double its spending on network maintenance to $28 million.