Shares of Cogent Communications (NASDAQ:CCOI, news, filings) are down 15% today due to attention of a very undesirable variety. The FBI and other law enforcement agencies internationally have taken down MegaUpload, a file sharing site that is accused of empowering massive copyright infringement and related piracy. People have been arrested, and dozens of search warrants executed. So what does this have to do with Cogent? Well, MegaUpload is, or should I say, was a big customer it appears.
According to reports, MegaUpload’s bill at Cogent was about $1M/month, and the loss of that business would certainly put a substantial dent in the company’s growth profile. MegaUpload’s traffic also featured somehow in Cogent’s peering dispute with France Telecom in 2011. Additionally, the FBI supposedly took information from Cogent’s computers, and one of the search warrants was served at Cogent’s location in DC with employees on hand for the raid itself in some form.
So what does it all mean? At the moment I’m going with “Yuck, what a mess…” Hopefully it will all shake out safely for everyone at Cogent and the market reaction will turn out to be beyond reality and hence a buying opportunity.
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