During Internap's (NASDAQ:INAP) second quarter earnings call, the company announced it 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 its CDN business back in October of last year, Internap has now written off around $150M of the $217M it paid for VitalStream in February of 07'. With this latest action, Internap has now removed the VitalStream acquisition from its books and is starting from a clean slate, so to speak, in regards to its CDN business.
With the VitalStream acquisition now out of the way, Internap also announced it would realign the company into two divisions, with its CDN services now falling within the 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 its business.
While Internap still needs to come to the market with a clear and concise CDN product offering and message on what exactly it offers, and still needs to fill the open vacancy's for its GM of CDN and VP of engineering, it sounds like Internap is now a lot more realistic on where its CDN product aligns with the rest of the company.
On the call CEO Eric Cooney mentioned that Internap is working to launch its "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, my contact explained that the technology the company is working to roll out are things like support for Microsoft Silverlight and SmoothStreaming, not some kind of proprietary CDN technology.
Over the past two years, it's been start and stop for Internap's CDN business as the company has made so many changes to its management and the focus of the company, that's it's been impossible for its 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 it can move forward once and for all with a very focused CDN offering. Only time will tell.
Disclosure: No position