(Reuters) - Internap Network Services Corp, a provider of services that help improve Internet connectivity, is not up for sale at a time when a wave of consolidation is sweeping through the fast-growing telecom networking industry.
Bankers and analysts had identified Internap as a potential target for bigger rivals amid a scramble to tap into strong demand for ‘cloud computing’ that allows remote access to computing power and data over the Internet.
“I am not shopping the company and we listen to any offers that come in and respond accordingly,” Internap’s Chief Executive Eric Cooney told Reuters.
Analysts reckon AT&T Inc, Windstream Corp, CenturyLink Inc and Frontier Communications are all on the prowl for takeover opportunities in the space.
“At this stage the best value for our shareholders is to continue executing our organic growth plan,” Cooney said.
A number of deals have been struck this year including Verizon Communications Inc’s $1.4 billion bid for Terremark and phone company CenturyLink Inc’s more recent $2.5 billion acquisition of Savvis.
“We believe Internap represents a compelling buy as it operates defensive telecom businesses with solid growth prospects, has no debt and the recent drop in the stock,” Clayton Moran, an analyst at The Benchmark Co, told Reuters.
Earlier this year, rival Rackspace also said it was committed to staying independent. Other players like Equinix, InterXion Holding NV and private firms SoftLayer Technologies Inc and Joyent are also considered attractive targets by some analysts.
Cooney was the former CEO of TANDBERG Television and oversaw its acquisition by Ericsson Group in 2007. He left TANDBERG to become Internap’s CEO in March 2009 and has been instrumental in driving growth in the company’s data center business.
Originally an internet protocol (IP) service provider, Internap began to provide its own data center services under CEO Cooney’s leadership. The company also did away with its business that was primarily selling data centers for other providers.
Internap is betting on growing demand for web-hosting in data centers — large warehouses lined wall-to-wall with powerful computer storage servers, marking a shift away from its other business, IP services.
“While the IP services is strategically important to us...in financial or revenue terms, the dollars of growth will come prominently from the data center side,” Cooney said.
The company’s revenue was almost equally divided between internet protocol (IP) services in its latest reported quarter on July 28. Its IP services revenue has stayed stagnant or declined over the past year, but its data center business has fared much better.
Cooney expects Internap’s data center business to outpace the market growth rate of 15-20 percent.
Demand for data center services has been driven by an explosion in telecommunications and the growing popularity of cloud computing.
“Increasingly we will look much more like Rackspace, Savvis or Terremark did before they got acquired, in terms of revenue and profitability growth,” he said.
Internap will add 42,000 square feet to build on its capacity of 141,000 square feet, as it eyes growth in 2012 and beyond.
The company’s shares have fallen about 38 percent since it posted its second-quarter results in late July. They closed at $4.54 on Friday on Nasdaq. (Reporting by Rachana Khanzode in Bangalore; Editing by Viraj Nair)