Consolidation has begun in the content delivery space, Korean based CDNetworks and US based Panther Express announced their merger today. Contentinople and the Business of Online Video have further details on the event. Both companies being private, the financial terms were not disclosed. CDNetworks was much larger than Panther of course, being the #3 CDN on a revenue basis. However, the pairing looks like a good one strategically. CDNetworks gets what it has been seeking, a truly credible entry into the US and European markets. And Panther gets what it has been seeking, the scale necessary to survive.
Personally, I did not think it would begin so soon, that there would need to be more pain first in an overcrowded field. Will this be the start of a consolidation frenzy? Or are these two just precocious? I think that depends on how the first few months turn out at the combined company. You see, other than Akamai’s asymmetric absorption of its early competition, nobody has really combined two modern CDNs lately. Unlike telecom network integrations, the internals are not made of mostly interchangeable parts, the core of each CDN is often based on proprietary stuff – you can’t just hook them up and groom them. The mere combination of the Vitalstream CDN into the IP/colo business of Internap Network Services (NASDAQ:INAP, news, filings) turned out to be a huge can of worms – but that’s just one datapoint. If CDNetworks and Panther do blaze a path to integration nirvana, I think they will start the M&A snowball down the hill. But until then…
Even though I expressed doubt last summer that any carrier would buy their way into the CDN market, I have been somewhat surprised that this has held up amidst the frenzy of partnerships and reselling deals. Now am even more surprised that the first move was between two CDNs. I figured if consolidation did start, a carrier would be doing the buying. The good news is that this pairing probably isn’t going to hurt too much on the job front, just because there isn’t all that much geographical overlap. There will be some redundancies, but in many ways this is like CDNetworks buying rather than building.
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