Internap Closes The Door On VitalStream Acquisition: Takes $99 Million Writedown

It should come as no surprise to anyone that yesterday, in a 8-K filing with the SEC, Internap announced they would take a write down of "approximately $99.7 million" for the value of the CDN business Internap purchased from VitalStream for $217 million in 2007. While some have been speculating that the write off should have been closer to $200 million, Internap's CDN business does have some value and has to be assigned some sort of fair evaluation. With Internap reporting earnings next week, I expect we'll hear more on how they decided on the $99.7 million number and how they value their CDN business moving forward.

For Internap, it's been a really rough year for their content delivery business. With the write down now behind them and the uncertainty of what they may or may not do out of the way, hopefully this now closes the door on the VitalStream acquisition mess and allows Internap to move forward with their CDN offering. Next year is a clean slate for Internap's CDN business and if I were them, I would treat their CDN business as if it was a new startup in the market and completely re-align and re-brand their content delivery offerings.

Comments

[shaun]

hey dan, would you care to guess how much revenue internaps CDN they bought will do in this year and next? just trying to guage rough market share if thats possible. thanks!

[Dan Rayburn]

Hi Shaun, if I remember correctly, they did $10.5 million in combined CDN revenue for Q1 and Q2 of this year. I would expect Internap to do between $5.5-$6.5 million in Q3 and about the same in Q4 for CDN revenue. So on the low end, $22 million for the year, high end, $24 million. Please keep in mind this is my guess and is not based on me having any insight into their financials.

[grinsandfun]

I believe they also lump in their managed server business into the CDN business (from what I hear) - has anyone been able to get them to break this out on their P & L to show what is really CDN vs. managed servers?

[Fiberbull]

LLNW has a negative enterprise value and Vitalstream is worth $100 million? INAP management is still in la la land.