Posted by : Randy Cooper in (CDN)

Can Cooney bring #Internap’s #CDN business back to life?

internap_logoIn January, Eric Cooney, the former chief executive officer of Tandberg TV (which was acquired by Ericsson in 2007) was named CEO of Internap (NASDAQ: INAP), a colocation and IP transit services provider. It was a turbulent time for Internap. Although the data center business was booming, the company had struggled to integrate the assets of VitalStream, the content delivery network (CDN) provider it had acquired in 2007, to the point at which, last fall, Internap took a $100-million goodwill write-down on the assets it acquired for $217 million. And this month, it wrote down another $57 million, essentially emptying its books of the acquisition. With that slate now clean, some analysts say Cooney can reboot Internap’s CDN business and reinvigorate its IP services business, whose sales were down 7% in the second quarter. In a report this summer on the CDN sector, Yankee Group senior analyst David Vorhaus said that for Internap, “The challenge now is not one of technology or vision…but rather one of overcoming the preconceived notions that longtime CDN customers have of Internap.” Cooney hopes to change those notions in part by launching a new CDN platform this year. And the company is embarking on a $50-million expansion, building and acquiring its own data centers, thus reducing its reliance on partner sites. Cooney spoke with Telephony’s Ed Gubbins this week about that expansion and about the strategy for reinventing Internap’s CDN.

On CDN as a feature set: The way I think of our CDN is as an extension of our IP services offering, a feature set. We’re selling IP services. The fact that we have CDN is a feature set or a value-added benefit we can provide, hopefully to help differentiate us from the alternative service providers.

On the new CDN service Internap is launching later this year: In the second half of this year, we will be launching our as next-generation CDN, the next iteration of our CDN product. The intention is to narrow the focus to more of a video-centric CDN, drawing a distinction between HTTPs, small-file downloads and Website acceleration, to specifically focus on video. That’s the first market-narrowing. Then, once we’re talking about video-centric CDNs, our value proposition ties nicely with [the value proposition of] our general IP services. We think the consumer will be able to see and differentiate an Internap-delivered video service relative to that being delivered by any other CDN provider… I’m not suggesting we’ve reinvented the CDN wheel. We’re more talking about Internap taking a combination of technologies like [Microsoft’s] Silverlight and Adobe’s version of the adaptive bit rate technologies and various transcoding technologies and the capability to [identify] devices [as a] mobile phone, a PC, TV, etc. It’s a combination of some off-the-shelf product as well as some Internap technology, combined with our route-optimization technology, packaging it together and creating a CDN offering, or feature set, that is an extension of our IP services offering.

On speculation that Internap’s recent change of accounting practices, to tuck CDN inside IP services, signals waning interest in the CDN space: I would caution against that conclusion based on removing CDN as a standalone external reporting segment. We made significant management organizational changes internally over the past three to four months. The job function overseeing our CDN business reports to the job function overseeing our entire IP business. From an operational and a physical standpoint, all the CDN [points of presence (POPs)] have been integrated with our IP POPs, and the CDN network operations center (NOC) was consolidated physically into the IP services NOC, and likewise the associated operations and support staff for CDN were consolidated organizationally into the operations and support staff for our IP services group. Internal to the company, we’re really looking at IP as a business and at the data center as business, and the accounting rules require that externally you report in a fashion that reflects your internal structure and management. That’s what triggered the need for CDN to be rolled under [IP services]. And the final step of that dual-segment reporting also then triggered the requirement to then revalue the assets on the balance sheet that triggered the good-will write-down. Nothing I said there had anything to do with our CDN strategy, our value proposition, or our expectations for that business going forward. I do disconnect the two.


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