Internap to Acquire VitalStream

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.

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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.