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Is Savvis CDN Business For Sale?

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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.

13 Responses to “Is Savvis CDN Business For Sale?”

  1. Om, on a somewhat related note, I know that Savvis’ Digital Media Services group was recently spinned-off as Origin Digital. How will that affect this potential sale?

  2. Dark Vader

    If Google bought limelight, and of course there are silly rumors a float. Akamai could really turn the heat up in the patent lawsuit. If Akamai bought Savvis CDN they could turn up the heat on the LL suit and hammer everyone. If Akam does not buy Saavis does it mean Akam could go back after whoever the buyer is and that the Saavis IP is not defendable.?

    If anyone hears who SVVS goes exclusive with let us know. This story will only get more interesting.

  3. Anonymous

    So where does SPEEDERA come in? A link to Sandpiper – Akamai litigation would be more relevant. Sandpiper and Speedera were not the same company. The link to the Speedera lawsuit involves information-theft.

    Re-read my original post if you’re still confused.

  4. Anonymous

    I think Om has it straight on the litigation and you are the one that is wrong.

    Savvis owns patents developed at Sandpiper. Akamai sued both Digital Island and Cable & Wireless on patent infringement related to the original Sandpiper patents (which were acquired by Digital Island then C&W and eventually Savvis). The debate was over whether load balancing is done at the DNS or the content servers. Akamai has patented the dns approach.

    Both parties had claims affirmed in the jury trial and both parties had claimed rejected. Eventually they agreed to settle.

  5. SVVS’s CDN is a real bright spot for them and $100M for $40M in revenue(in which the cost for providing this service over SVVS’s infrastrucutre is a fixed cost for SVVS regardless of whether they have the CDN or not) is cheap. Way too cheap. I have the thing Phil and Jonathan Crane see the value in their CDN and want to leverage it further.