VeriSign Expected To Sell Their CDN Business

Implications: A few weeks ago, VeriSign held they annual analyst day where they unveiled new details about the company's strategic direction for 2008. Their newly announced strategy is to sell a number of businesses in the company's portfolio, such as communications, billing and commerce and focus instead on their core business and a smaller group of products and services.

Analysis:

While VeriSign stated that it would review its content delivery offering over the next six months and decide whether or not to keep it, the CDN business is already being shopped around to other CDNs and content companies who many want to own their own network. While all the major CDN players are looking at the assets, it's unlikely any of them will be a good match for the business. VeriSign's CDN business really only consists of the P2P offering they acquired from Kontiki and has very little in the way of any traditional CDN products, so it's really a P2P infrastructure sale. Most CDNs already have a P2P offering they have been working for some time or don't have an interest in P2P until there is more traction in the market.

There is also the possibility the CDN business could be sold along with other products and services in a larger deal or all together if VeriSign as a company is sold. A few of the telcos not yet in the CDN business are currently investigating whether or not to offer a CDN product and this could be a cheap way for them to potentially enter the market with a P2P offering to start. The real question is how much revenue the CDN business is doing and what it's assets are worth. My guess is that VerSign will probably do about $8-10M for 2007, but I don't know for sure. One thing I would be willing to bet on is that VeriSign would unload it for a lot less than the $62 million in cash they paid for it.

It will also be interesting to see how this affects a few of the major broadcasters in Europe including the BBC, Sky and Channel 4 who all currently use VeriSign's P2P solution for video delivery. .

The biggest speculation I keep hearing is that Limelight Networks will buy the business so they can acquire a P2P offering and add some additional revenue. But the more that comes up, the more I think it's not a fit for Limelight Networks as a company and if they were to do any acquisitions, they would have to be all stock based and one would think VeriSign does not want stock. My feeling is that VeriSign will make the decision very soon and part with the business very shortly. The real question is to who.