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Verizon Scoops Up CDN Provider

Alan Breznick
12/9/2013
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Racing to boost its competitive position in the emerging TV Everywhere market, Verizon Communications has struck again, making a deal to acquire another cloud-based video specialist.

Verizon Communications Inc. (NYSE: VZ) announced Monday that it will buy EdgeCast Networks Inc. , a privately owned content delivery network (CDN) provider. One of the fastest growing Internet firms, seven-year-old EdgeCast boasts more than 6,000 customers, including such large North American and European telcos as BT Group plc (NYSE: BT; London: BTA), Deutsche Telekom AG (NYSE: DT), and Telus Corp. (NYSE: TU; Toronto: T).

No terms of the deals were disclosed. But TechCrunch reported Sunday that Verizon will shell out more than $350 million for EdgeCast. Verizon said it expects to close the deal early next year.

The EdgeCast deal comes less than a month after Verizon scooped up uplink for an undisclosed sum. That three-year-old startup, which powers video streaming for the Watch ABC and Watch Disney TV Everywhere apps, focuses on streamlining the uploading and encoding of video streams for TV Everywhere services. (See Verizon Beefs Up TVE Unit.)

As with uplink, Verizon plans to integrate EdgeCast into its cloud-based video services unit, Verizon Digital Media Services . Specifically, the telco said Verizon DMS "will integrate EdgeCast's complementary capabilities to further improve and increase its ability to meet the exponential growth in online digital media content," as well as "broaden its portfolio of site acceleration services for digital enterprises."

EdgeCast, which has raised about $74 million in private funding since its 2006 launch, has made a name for itself in the fiercely contested CDN space despite competing against much bigger, more established companies. Its rivals include Akamai Technologies Inc. (Nasdaq: AKAM), Limelight Networks Inc. (Nasdaq: LLNW), Level 3 Communications Inc. (NYSE: LVLT), and Alcatel-Lucent (NYSE: ALU).

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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albreznick
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albreznick,
User Rank: Blogger
12/10/2013 | 9:26:36 PM
Re: Verizon
So do you think yet another acquisition may be needed for Verizon? Or do they now have what they need to do whatever they're going to do? The plot thickens.
kk-1
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kk-1,
User Rank: Light Beer
12/10/2013 | 2:38:24 AM
Re: Verizon
$70M+ in financing means a post-money valuation of probably around $125M to $150M. Which means it's a 2X or so return for the VCs.

That begs the question - why did Edgecast sell for such a low multiple? Obviously, they wanted an exit and a better one didn't show up - which means they were likely not doing too well, and VDMS won't necessarily get lots of new business from this acquisition.
^ip4g^
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^ip4g^,
User Rank: Lightning
12/10/2013 | 2:13:55 AM
Re: Verizon
.. the same way BitGravity is with Tata Communications. Do they get really forged, going forward ?
David Dines
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David Dines,
User Rank: Blogger
12/9/2013 | 7:13:39 PM
Re: Verizon
Good question Alan, I would not try to guess what, if anything, is the end game for Verizon.  While they have been at this for a while, starting with Velocix, it is hard to know how much they dedicatd to making it happen. I would hypothesize that they tried to make it work first with a homegrown software, then they tried Velocix, then gave up and bought Edgecast.
albreznick
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albreznick,
User Rank: Blogger
12/9/2013 | 6:49:26 PM
Re: Verizon
Very interesting indeed. I wonder what Verizon is up to here too. If they were serious about CDNs, why didn't they start earlier and go bigger? Or do they have something else up their sleeves?
David Dines
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David Dines,
User Rank: Blogger
12/9/2013 | 3:44:20 PM
Re: Verizon
Very interesting development. I have noticed that the telcos in the past seem to consistently underestimate what it takes to make a global CDN network highly successful.  At least now Verizon will have a knowledgable sales and service staff. I have a wait and see attitude as to whether they will be able to increase market share - if the Terremark acquisition is any indicator, I would not expect great things out of this.
bosco_pcs
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bosco_pcs,
User Rank: Light Sabre
12/9/2013 | 3:00:13 PM
Re: Verizon
Dan: 

if memory serves, folks like VZ and T would show their CDN ambition causing some discomfort to folks like AKAM and LVLT from time to time. Then the latter would respond saying they are more than just commoditized CDN providers

I have no clue abot EdgeCast but if VZ's hosting ACA is any guides, perhaps people should wait and see how the regular CDN gang turn out in the next few Qs before they draw any conclusions
wanlord
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wanlord,
User Rank: Light Sabre
12/9/2013 | 1:32:31 PM
Re: Verizon
I think it took someone too long and too much money to realize it wasn't worth trying to build it in house...
DOShea
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DOShea,
User Rank: Blogger
12/9/2013 | 12:27:25 PM
Verizon
Seems like Verizon is taking a much different direction than AT&T, which has been working closely with Akamai rather than trying to buy up CDNs.
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