Who Will Buy Velocix?

May 2nd, 2009 by · 7 Comments

Dan Rayburn is reporting that CDN Velocix is currently negotiating a sale,  apparently with two buyers still in the game.  Precisely who those two potential buyers might be is not yet public, but because of Velocix's unique approach it would seem as if a network operator would be a natural fit.  Velocix's 'Metro' offering is the prize here, because it fits so well with the ISP model.  Using it, service providers can build their own private CDN that lives within the Velocix network, having some control over its design, usage, and revenue generation.  To guess what telecom might buy Velocix, we should look at who would benefit most from integrating the Metro product into their portfolio.  Let's look at a few:

Verizon - This is the obvious one, because of their existing relationship with Velocix.  If Verizon (NYSE:VZ, news, filings) has found it of value, then they could easily snap it up.  And if someone else threatened to buy it, they very well might bid against them to prevent it falling into other hands.  They are almost certain to be involved, and would have to be the odds-on favorite to win the auction.  On the other hand, Verizon is less of a wholesaler to the various ISPs and more of a competitor, they aren't likely to want the Metro product for its benefits to others - only to itself.

Level 3 Communications - While Level 3 Communications (NYSE:LVLT, news, filings) certainly has enough on its plate right now, its CDN group is still on the move and the money required for a deal like this would not be out of reach.  More importantly, Level 3 already has a big wholesale relationship with the ISPs that Velocix targets.  It would be easy to see Level 3 offering ISPs the Metro product as a part of its CDN effort - extending its footprint and gaining long term partners.  In fact, they'd have an easier time selling it to ISPs than Velocix, and one could see a desire for such technology evolve out of the CDN express lane product they have been trialing.  Thus, the product synergies Level 3 might get out of such a deal very well might be better than those of Verizon.  That said, they cannot outbid Verizon if Verizon wants it.

AT&T - There is as yet no indication that AT&T is looking for technology like this, and their recent moves have been about the corporate market.  That said, they have been holding their cards close to their vest and they could do it with pocket change so you can't count them out.

DT, BT, FT, TeliaSonera - They certainly could, but I think they have less reason to do it than Verizon does so I discount the possibility somewhat.

Global Crossing - It's not totally out of the question, but Global Crossing only recently began reselling CDN services. I doubt very much they would make a move like this

Reliance Globalcom, Tata
- This just doesn't seem like their cup of tea, their CDN efforts are more likely to be globally focused.

Cogent, XO - Very unlikely.

Who else?  Maybe we should be looking at Cisco.  Cisco's rumored steps toward a CDN could involve something like Velocix's Metro, where Cisco mostly sells boxes but with a centralized CDN framework for all its customers to hook up together with.  Hmmm, that might actually make sense, I need to think about that angle some more.

But my money for the two bidding for Velocix would have to be Verizon and Level 3.  Verizon has the greater firepower, and Level 3 has the greater potential benefit.  Does anybody have any other candidates that seem likely?

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Categories: Content Distribution · Internet Backbones · Mergers and Acquisitions

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