Internap Tussles With Agents, a Sign of M&A On the Way?

July 25th, 2011 by · 3 Comments

According to Channel Partners Online on Friday, Internap Network Services (NASDAQ:INAP, news, filings) is revamping its channel, and some of the agents affected are not happy at all and are considering lawsuits and such.  In a followup, Internap clarified a few details, i.e. that they are trimming their list of master agents from 40 all the way down to 10.  Each of those 30 master agents has a list of subagents, meaning that a few hundred are getting the boot – including their evergreen monthly recurring commissions.  Agents in this segment were already smarting from Equinix’s cutoff of the Switch & Data channel, which surely isn’t helping their mood.

Leaving aside the contractual disputes, the details of which we will not likely to ever be privy to, it is clear that Internap wasn’t getting what it wanted from the channel and has taken some drastic action now in response.  The company has been revamping itself over the past year, shifting its focus further toward colocation and starting to make a substantial move on the cloud.  It is possible to view this agent dispute solely in that light, as reflecting the changing needs of what is now a rather different company.  However, it’s also possible that they are positioning themselves for M&A by reducing unfavorable obligations.  The company has been rumored to be a potential target a few times in the first half, and while nothing has come of it yet one gets the feeling that strategically this is the path to which their recent efforts logically lead.

Who would buy Internap?  They do colo, but it’s on a smaller scale than Savvis or Terremark, and they still derive much of their revenues from IP transit by blending bandwidth from many major transit networks.  They also still do have that CDN offering, though we don’t hear much from it these days.  It’s not really a fit for a large telecom I think, who would not view the niche IP business favorably.  The assets and products would probably work better in the hands of a major systems integrator (IBM perhaps?) that would find all three useful in boosting their cloud potential in a network neutral way.  Internap’s ability to leverage the same assets on its own is probably more limited than a systems integrator with plans for the cloud, deep pockets, and existing customer relationships.

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Categories: Cloud Computing · Datacenter · Mergers and Acquisitions

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3 Comments So Far

  • Anonymous says:

    How about Viawest who have been agreesive and may want to expand into other parts of the country from there current west presence.

  • Anonymous says:

    I believe in 2010 they were bought by equity investors whp maintained managemnet and allowed for original investors to depart. Much bigger pockets and much more deisre to grow is what I understand. BAsed on Dallas and Portland expansions and new construction in Denver I woudl say they have some $$

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