Savvis, a St.Louis, Missouri based internet services provider is looking to sell the content delivery network part of its business, according to those familiar with the plans.
“The inquiry would fall into the category of rumor which we would not comment on,” Carter B. Cromley, Director, Public Relations & Industry Analyst Relations at Savvis says, in response to our query. Content delivery network sources and some folks on Wall Street say bankers have been actively shopping this deal.
There have been a few bids from interested parties, though nothing has been finalized, and the deal might not go through. The bids for the 91-person business that encompasses about sixty clusters in 29 countries are said to be over $100 million.
Savvis owns what used to be Sand Piper and Digital Island’s CDN assets. Cable & Wireless had bought Digital Island for about $340 million in the first Internet bubble. So compared to that, the sale price is peanuts.
In combination with WamNet, the company brings in about $40 million or so in sales, though a majority of its CDN business comes from Microsoft.
The buyers interested in the company could include anyone from private equity investors to large national level telecom operators and even Akamai. In fact, Akamai could buy the company and further increase its control of the CDN market, and the IP involved with CDNs.
Sand Piper Digital Island was involved in some litigation with Akamai.
The high price for this tiny business is indicative of the reversal of fortunes for the CDN business, which has been a primary beneficiary of media moving online. A few days ago, Internap acquired Vitalstream for about $217 million. Limelight Networks, another private company raised $130 million in capital to grow its business, even though the company is locked in litigation with Akamai.
But the primary driver for the CDN activity is Akamai’s stock price – the company now has a market capitalization of around $5 billion. Savvis is smart to get out of the business now. It makes money when people buy bandwidth. CDNs save that bandwidth, and as a result two businesses are at odds with each other. Okay that is too logical.
Anyway as they say if ducks are quacking, feed them.