Over on Contentinople, there is speculation that Internap will exit the CDN business. The argument is basically that they have screwed it up so badly so far, they may just give up and write it off. Personally, I doubt it. The street tends to create urgency where there is none, there is no urgency for Internap to just give up and it is against human nature to do so.
I do think that Internap has to make some decisions from here, but I disagree with the analyst who said that the assets never made sense in Internap’s hands. From a strategic standpoint, a CDN product has always made sense alongside Internap’s high end blended transit and colocation. That’s why they were reselling Akamai’s services before this debacle even started – their customer base really does have interest in CDN services. What Internap has failed at (so far) is execution, not strategy. They have to convince both themselves and their customers that they know how to run a CDN, else they need to sell out to someone who can.
But the strategic fit works both ways. It may make sense for a CDN, one that wants to stay independent of the telecoms, to buy Internap. Hold on, am I insane, you ask? Well think about it for a second. Limelight already resells some IP transit, might it make sense for Limelight to combine its CDN with Internap’s high-end blended transit niche plus a colocation business that would have synergies for all those servers? There are cost savings to be had there. Yes, I do realize that Limelight probably is not in a position to pull it off right now, but I think that is the only big thing in the way of such a move. What about Akamai? If they don’t need a backbone but do need a broader portfolio to compete with one, then Internap’s customer list would not be a bad place to start.
Ah well, I doubt that will happen, but you never know. From here I think all Internap will simply try to regain its reputation, one connection at a time. What do they have to lose?
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Categories: Content Distribution · Mergers and Acquisitions
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Nice post. Just adding my two cents.
While I agree on the fact CDN was a strategic fit for the Company (I’d rather say a product they were already selling to their customers…), I do not think Internap is an acquisition target for a CDN.
I just can’t see any reason for Limelight to buy Internap at this stage. They don’t need the (very limited) revenue generated today by Internap in CDN, and mostly the footprint would be a doubling (Equinix data centers around the world) – I can’t see a real advantage.
Limelight would only be distracted by Internap’s core business (IP Services – half of revenues…) and I doubt they could benefit from the Internap owned data centers in secondary locations like Atlanta, where the majority of space is (and where Internap is expanding into QTS data center, by the way…) or Houston…
As to Akamai, it seems to me they never believed in the “super bandwidth” proposition, and again I can’t see a strategic fit. Not even eliminating a high profile competitor… which Internap, today, is not…
Internap may be an interesting acquisition target, but I doubt because of its CDN business – unless it is an excuse and the rest fits even better in the buyer’s business model.
I agree that Limelight will never buy Internap. It’s not a fit for their company, their services or their strategic plans moving forward.
That being said, I would not be surprised if Internap wrote off the VitalStream acquisition. But I doubt they will exit the CDN business as shareholders would punish the company even further than it has and Internap already has spent the money and time to integrate the CDN offering. If Internap hired someone who knows how to productize, price, package, market and sell the CDN services, then they would see revenue grow. Until they hire some CDN folks experienced in the “business” of CDN and not the technology, it will be hard for them to make it work.