CDN Consolidation Begins as CDNetworks, Panther Merge

Written by Ryan Lawler

Wednesday, February 25. 2009 at 03:00 AM EST Post a comment

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It looks as if CDN consolidation has finally begun in earnest, as Korean content delivery network CDNetworks Co. Ltd. is merging with U.S.-based competitor Panther Express Inc.

As part of the merger, CDNetworks will assume all of Panther's U.S. and North American operations, including its network infrastructure and personnel. Financial terms of the deal were not disclosed.

Former Panther CEO Steve Liddell will become president of CDNetworks International, and will be charged with overseeing the company's U.S. and European operations. Prior to taking charge of Panther last May, Liddell had held several executive roles at Level 3 Communications Inc. (Nasdaq: LVLT), including president and CEO of its Asian operations.

The companies say the deal is being done after plenty of due diligence and a careful evaluation of any possible overlap in customers and technology. In a conversation with Contentinople, CDNetworks chief strategy officer Steve Chung stressed that the companies saw synergies in their product portfolios and in their regional reaches.

For instance, while Panther only offers HTTP-enabled file caching services to its customers, CDNetworks has a product set that includes streaming video capabilities. And while CDNetworks has a strong Asia/Pacific clientele, Panther has been focused almost entirely on North America and Europe.

In fact, Chung says it was his company's desire to capture more of those markets more quickly that ultimately led CDNetworks to merge with Panther:

"We believe that [this merger] gives us the quickest time to market in the U.S. and Europe. We decided we could get there a lot quicker and a lot better with Panther than without."

While the merger might look good on paper, there are still plenty of obstacles to making it work. For one thing, the combined company will have to determine how best to merge its technical assets in a way that provides customers a high quality of service.

That proved to be a major stumbling block for Internap Network Services Corp. (Nasdaq: INAP) during its acquisition of Vitalstream. While most observers agree that Internap overpaid for the Vitalstream CDN assets, the business was further confounded by issues that the company had with integrating Vitalstream's CDN into its network.

For now, CDNetworks has yet to decide how it will best rationalize network assets -- for instance, shutting down points of presence (POPs) in places where the companies have redundancies, or restructuring transit deals with providers that serviced both CDNetworks and Panther.

And there's always the threat of an exodus of customers that might be confused by the transition or might not want to buy from the new combined entity. Anecdotal evidence suggests, for instance, that Limelight Networks Inc. (Nasdaq: LLNW) built much of its early business off of Speedera customers that fled in the wake of the Akamai Technologies Inc. (Nasdaq: AKAM) acquisition.

But Liddell remains confident that customers will ultimately benefit from the merger.

"We evaluated that very carefully, looking at both customers that use one of our companies or both of us. And we see very little risk of customers leaving, but we do see tremendous upside for both of our customers, both in the range of new products and increased geographic reach," Liddell said, when asked about the possibility of customers leaving.