Internap Writes Down Another $50M Of Their CDN Business, Realigns The Company
During Internap's second quarter earnings call yesterday, the company announced they would take a write down of $55.6M, with about 90% of that coming from the legacy VitalStream CDN business. Having already taken a write down of approximately $99.7 million for their CDN business back in October of last year, Internap has now written off around $150M of the $217M they paid for VitalStream in February of 07'. With this latest action, Internap has now removed the VitalStream acquisition from their books and is starting from a clean slate, so to speak, in regards to their CDN business.
With the VitalStream acquisition now out of the way, Internap also announced they would realign the company into two divisions, with their CDN services now falling within their IP services and data center services segments. The traditional CDN business will fall under the IP services group and the legacy manages services business from the VitalStream acquisition aligns under the data center business. On paper this makes a lot of sense and I think it gives us a clearer picture of how Internap's CDN offering will fit in with the rest of their business.
While Internap still needs to come to the market with a clear and concise CDN product offering and message on what exactly they offer, and still needs to fill the open vacancy's for their GM of CDN and VP of engineering, it sounds like Internap is now a lot more realistic on where their CDN product aligns with the rest of the company.
On the call CEO Eric Cooney mentioned that Internap is working to launch their "next generation CDN product later this year", which has some investors speculating that Internap is working on some kind of new CDN technology. In a conversation I had with with Internap last night, they explained that the technology they are working to roll out are things like support for Microsoft Silverlight and Smooth Streaming, not some kind of proprietary CDN technology.
Over the past two years, it's been start and stop for Internap's CDN business as they have made so many changes to their management and the focus of the company, that's it's been impossible for their CDN offering to get any traction or have any focus. With management changes now hopefully completed, the VitalStream acquisition off the books and the company realigned, hopefully Internap is now at a point where they can move forward once and for all with a very focused CDN offering. Only time will tell.