Verizon Acquires EdgeCast Networks
The telecom giant is looking to complement its earlier purchase of UpLynk and at the same time, strategically position itself to meet the needs of the increasing demand for data and video services
Yesterday, Verizon Communications Inc. announced an agreement to acquire the Los Angeles-based Content Delivery Network (CDN) company, EdgeCast Networks for over $350 million.
EdgeCast Networks, a provider of networking solutions along with web services and content delivery has been one of the fastest growing technology companies since its inception in 2006. The company specializes in on-demand delivery of data and rich media content and has about 6,000 clients that include Fortune 500 companies. The company is also strategically partnered with Google Inc. (GOOG), Microsoft Inc. (MSFT) and Yahoo Inc. (YHOO).
EdgeCast, which has been profitable over the last four years is largely considered an upstart and was initially funded by the venture arm of Disney. The company, with a current run rate of $100 million has raised $74 million in funding since 2006.
Verizon, the leading wireless service provider in the country, has been foraying into content delivery and web management solutions through its Global Enterprise Solutions Business. Verizon operates in an extremely competitive and saturated wireless market where market penetration exceeds 100%. Previously, its growth had been driven by network superiority in its wireless segment, which accounts for almost 70% of the company’s revenues but increased competition from AT&T (T), T Mobile (TMUS) and Sprint (S) as well as smaller regional competitors has forced wireless providers – including AT&T – to expand into content delivery among other value added services.
Through the acquisition, Verizon is looking to boost its enterprise business, which saw a 2% year-over-year (YoY) decline in revenues to $15.3 billion in 2012. Verizon seeks to take advantage of the resources EdgeCast has identified. EdgeCast, which has a strategic global infrastructure presence in five continents, has identified “super” locations through which it provides peering and sharing services, and the acquisition will give Verizon a platform to expand its existing infrastructure on a global scale.
Verizon, which was also in talks with Intel Corp. (INTC) to purchase its Web-TV business earlier in the year, acquired the assets of a web-streaming technology company, UpLynk in November. The acquisition of EdgeCast is expected to complement UpLynk’s purchase by providing fast, readily available data and video content to users on multiple devices and in different formats.
Given the current trends in the industry where wireless revenues are growing and wireline business is declining and data revenues are on track to surpass voice revenues in 2015-16, Verizon has positioned itself strategically to align all its businesses with industry trends and demand growth.