Dan Rayburn submits: In an article on Barron's website this week, which Seeking Alpha has an annotated article summary of by Judy Weil, Mark Vererka says that Internap (INAP) may be the next Akamai (AKAM). No offense to Internap, but that's an absurd statement for anyone to make. As you'll see below when it comes purely to revenue, numbers don't lie.
It's amazing the amount of analysts who make blanket statements about vendors in our industry, yet then provide no data to back up the predictions and even contradict themselves with the numbers they then use in their articles. For starters, Judy Weil's summary of Mark's article says that "Patent and price battles have seen content-delivery-network giant Akamai and upstart competitor Limelight lose ground." Lose ground to who? How can you make a statement that the number one and number two companies in the space, based on revenue, are losing ground but then don't say who they are losing it to?
The article also says "Internap only recently entered the CDN business with its VitalStream acquisition, and CDN accounts for just 10% of Internap's $192.3 million in revenues." That amounts to roughly $20 million last year for Internap in CDN revenue compared to Akamai's roughly $200 million last year on CDN services and Limelight Networks $60 plus million from CDN services. How do those numbers show Internap becoming the next Akamai? Akamai is doing 10x the CDN revenue Internap is. The fact that the article does not mention that last year, Internap was the number one reseller of CDN services for Akamai also goes to prove that even with the revenue Internap was getting from CDN, it was paying Akamai at the same time. These analysts need to do their homework.
The article does seem to be implying that Internap can become the next Akamai because it says "it (Internap) foresees explosive CDN growth as net users increasingly seek smooth delivery of rich online content." And the other CDN aren't seeing the same growth as well? That's the best reason you have for saying how Internap can grow it's revenue to be that of Akamai? Akamai as a company did over $400 million in revenue last year, Internap did under $200 million. Big difference.
It also goes on to say that "Internap's edge is its proprietary software that has guaranteed 100% reliable internet-routing services and data center hosting (90% of Internap's business), and now guarantees 100% uninterrupted content delivery. The reliability guaranty premium keeps Internap out of CDN price wars while gaining it market share." For starters, that SLA it is referring to is specific to network and data center services, it doe not apply to the CDN services of Internap today. Yes, Internap has confirmed that it intends to offer a 100% SLA specific to CDN services but not until it integrates the VitalStream platform and customers into the Internap network, something Internap is still working on. And even with a 100% SLA, how would that keep Internap or any CDN provider out of price wars? If it is implying that customers will pay more for a 100% SLA, then the article should give details on what is the premium over the going price they are willing to pay. But my guess is that the authors have no idea what CDN pricing even costs in the market.
The article then goes on to compare Akamai's revenue and product line with that of Internap. "Akamai shares fell about 25% last week over forecasts of market-share loss and shrinking orders; Limelight is down about the same this month. Barron's says Internap's Tuesday earnings report will forecast higher growth, lifting its $13.42 shares back towards January's $20 price." Last time I checked, Akamai and Limelight Networks were not in the co-lo and network business and not getting 90% of their revenue from those products, like Internap is. So how can you possibly compare Akamai, Limelight Networks and Internap's overall revenue and stock price fairly? You can't. Their core business and revenue generators are from completely different industries and product lines.
Everyone is entitled to their opinion and who am I to try and tell someone they are wrong? But when you make a blanket statements this article does, back it up with no data, and then don't even look at the data that is out there that proves you wrong, you shouldn't be writing about that segment of any market.
I recently got to sit down with management at Internap and VitalStream to ask about and get an update on their CDN offering and I hope to get to finish my write up of that for my blog this week.
Patent and price battles have seen content-delivery-network [CDN] giant Akamai (AKAM) and upstart competitor Limelight (LLNW) lose ground, while $667 million small-cap rival Internap (INAP) forecasts 30% earnings growth for 2007, 50% higher gross margins and company-wide higher profits. Internap only recently entered the CDN business with its VitalStream acquisition, and CDN accounts for just 10% of Internap's $192.3 million in revenues. But it foresees explosive CDN growth as net users increasingly seek smooth delivery of rich online content. Internap's edge is its proprietary software that has guaranteed 100% reliable internet-routing services and data center hosting (90% of Internap's business), and now guarantees 100% uninterrupted content delivery. The reliability guaranty premium keeps Internap out of CDN price wars while gaining it market share. Akamai shares fell about 25% last week over forecasts of market-share loss and shrinking orders; Limelight is down about the same this month. Barron's says Internap's Tuesday earnings report will forecast higher growth, lifting its $13.42 shares back towards January's $20 price.
Web Hosting Provider, Internap, Enters $15 Million Managed Services Agreement
Atlanta, Georgia - (The Hosting News) - July 30, 2007 - Internet performance network services company, Internap Network Services Corporation, has entered into a three-year business relationship with privately held data center facilities and managed services firm, Quality Technology Services (QualityTech).
Under terms of the agreement, Internap will be the preferred provider of content delivery network (CDN) services and the exclusive provider of IP connectivity services to all of QualityTech's customers, including 350 recently acquired enterprise accounts. The contract represents revenues of approximately $15 million for value-added CDN and IP over the three-year term. This agreement is hoped to significantly strengthen Internap's position as a leader in the Internet solutions category.
James P. DeBlasio, President and Chief Executive Officer of Internap remarked, ''This is one of the largest agreements in Internap's history and another significant win in the CDN/IP space. QualityTech's decision to select Internap for value-added Internet solutions validates our strategy of providing best-in-class, bundled solutions to meet the demands of enterprise customers. We are gratified that an increasing number of high quality service providers, like QualityTech, appreciate the highly differentiated approach inherent in Internap's route optimized CDN and IP solutions. We look forward to providing the industry's best service levels and technology solutions to QualityTech's customers moving forward.''
Through Internap's premium IP service, which uses Private Network Access Points (P-NAPs) to speed Internet traffic from one location to another, QualityTech's customer traffic will avoid the congestion and bottlenecks of traditional single-carrier networks. The service includes proactive technical service and support - all backed by proactive Service Level Agreements (SLAs) for 100% uptime. Internap's CDN is also the industry's only global, high-capacity solution that takes advantage of this unique multi-carrier architecture. Both solutions benefit from Internap's proprietary intelligent route control technology to ensure the consistent, reliable performance of mission-critical applications.
As part of the agreement, Internap will take down space in multiple QualityTech world-class data center facilities to help satisfy current and future market demand. QualityTech's data centers feature industry-leading standards for security, environmental control and scalability. The infrastructure will support high power density deployments and is designed to provide maximum power and cooling up to 150 watts per square-foot. As a result, Internap can better meet the high power density needs of enterprises with increasingly complex applications, such as rich media and streaming video.
Mark Waddington, President of QualityTech remarked, ''With our recent growth, QualityTech was at a tipping point and needed to join forces with the right partner to enable our customers' ability to reliably deploy mission-critical applications. As IP-based communications converge and the demand for networked services increases, our combined solution with Internap is a major step towards delivering the highest level of performance for our clients and supporting the unique requirements for emerging technologies such as streaming audio and video.''
QualityTech provides day-to-day IT operational support to improve operational efficiencies, mitigate risks and control costs associated with managing information technology infrastructure. Additional managed services, such as planning and consulting, configuration and implementation are also available to help meet IT requirements for deploying complex Internet applications. Both Internap and QualityTech will provide solutions to enterprises in industries ranging from financial services and e-commerce to gaming, media and entertainment.
Quality Technology Services (QualityTech) is a managed services and IT infrastructure company providing Managed Services, Data Center facilities, and Professional Services to businesses. Services are delivered via a national footprint of secure state-of-the-art Data Centers, a high-performance backbone and content delivery network, and an ITIL certified world-class services organization. QualityTech provides enterprises the ability to deploy, manage and scale their mission-critical IT operations for optimum performance and cost-efficiency.
Internap is an intelligent route control solution, developed to provide reliability, performance and security to the Internet, as well as a global integrated content delivery service, designed to enable businesses to stream digital media over the Internet. The company provides patented and patent-pending technologies that address the inherent weaknesses of the Internet, to enable enterprises to deploy business-critical applications such as e-commerce, VoIP, and audio/video across IP networks. The company provides additional solutions, including video and audio streaming, advertising placement, reporting and analysis, live event broadcasting, media asset management, integrated web hosting and consulting services. Internap currently serves more than 3,000 customers throughout North America, Europe, Asia and Australia.
