EV1Servers Selling Fewer Servers, But at Higher Prices

After years of explosive growth in customers and hosted sites, EV1Servers is now focusing on growth in its profit margins. After launching the discount dedicated server craze with $99 a month pricing, CEO Robert Marsh says EV1Servers wants to win long-term customers, rather than price wars.

"Price produced numbers, but service produced profits," said Marsh. In September, EV1Servers expanded its offerings to include virtual private servers (VPS), storage solutions and managed services. Most importantly, it began selling fewer servers at higher prices. The company's hottest sellers are no longer $99 boxes but Intel dual Xeon servers selling for $399 to $499 apiece. "They sell out almost as soon as they are available," said EV1's Isabel Wang.

EV1Servers began life as Rackshack, growing from 200,000 hostnames in early 2003 to more than 1 million this month. That rapid growth has meant heavy investment, including the expansion of one data center, the purchase of a second facility, as the cost of adding more than 10,000 web-visible servers between September 2002 and April 2004. While EV1Servers has added fewer servers over the past year, growth in hostnames and active sites has continued.

Growth at EV1Servers

The shift in the company's product mix has meant more revenue per server. In moving up the value chain, Marsh says much of EV1Servers' new sales are generated by word-of-mouth referrals and existing customers looking to upgrade equipment, adding high bandwidth packages and clustered servers. Private racks offering customized load balancing and firewall solutions have been strong performers, and the addition of remote server reboot capability and a system to deflect denial of service attacks have also proven popular with customers. Marsh says EV1Servers' annual revenue now exceeds $70 million, and could reach $100 million by the end of the year.

While growth has slowed from the frenzied pace of 2003, EV1Servers is building out additional space in the second data center, and retrofitting its main data center to further expand the facility's power infrastructure, which briefly limited growth in late 2003 when the company's growth maxed out the capacity of the local power grid.

"We haven't had a single unprofitable month in the past four years," said Marsh. "We are committed to growing our company as fast as possible while remaining profitable."