Internap to Acquire VitalStream

Posted on October 12, 2006

Our short take on the Internap (INAP) acquisition of VitalStream:
This is a risky attempt on the part of Internap to gain a Akamai-type valuation on Wall Street.

However, these types of acquisitions usually only make financial
sense when the purchaser has a higher multiple than the target. The
exact opposite, though, is the case in the Internap/VitalStream
combination. So either Internap management thinks their stock is very
undervalued on a relative basis, which the coming quarters may or may
not show, or they’ve entered into a highly overvalued transaction.
Which one is it? Only time will tell.

So overall, despite retaining our shares in Internap, given the
very favorable industry environment for managed Internet service, we
remain lukewarm on this acquisition, especially since our experience
has been that growth thru acquisition, especially when done with no
regard to absolute valuation measures, almost never lives up to its
hype.

Disclaimer:
We own shares in Internap. This site may include market analysis. All ideas, opinions, and/or
forecasts, expressed or implied herein, are for informational purposes
only and should not be construed as a recommendation to invest, trade,
and/or speculate in the markets. Any investments, trades, and/or
speculations made in light of the ideas, opinions, and/or forecasts,
expressed or implied herein, are committed at your own risk, financial
or otherwise.

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Disclaimer:
This site may include market analysis and we may own shares in the stocks mentioned in our reports. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.