Highwinds CEO Steve Miller talks about BandCon buy, and his new president, Steve Liddell…Part 3

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ranging from collocation to transport to transit to CDN customers that could leverage our international network for growth. It was a company that had good momentum, but did not have the right available capital to grow like they needed to grow. They would have needed tens of millions of dollars of capital to be able to build a network the size of Highwinds.

FierceOnlineVideo: You feel like it's a good fit?

Miller: It made sense for those guys; it made sense for us in our growth market, online video and IP services. It increased network capacity. Combined, now, we've got a network that's in excess of 2 terabits per second at the edge with more than 70 POPs worldwide and we're delivering 700 gigabits plus of traffic that really gives us a tipping point that - when you're looking at economies of scale and lowest cost of delivery in the marketplace - of not only purchasing power for network infrastructure but the peering capacity that we have worldwide.

As we looked at expanding our sales force on the West Coast this company had a team of 35 individuals, the majority were focused on sales and sales engineering, so it was really a natural fit for our company.

FierceOnlineVideo: And the purchase price was...
We can't say. We have a series of NDAs, but I can say it was a stock and cash transaction highly tied to earn out.

FierceOnlineVideo: Does (BandCon CEO) Ari Benowitz stay with the combined company?

Miller: One of the most interesting parts of this for us was that this was not a scenario where Ari was cashing out. It was a scenario were he was really excited about being part of the team, reporting directly to Steve Liddell as chief revenue officer of the combined companies so he's focused on growing our revenue. He'll be an integral part of growing this company and his incentives are in line with every executive in this company.

Liddell: They've got a very good bunch of people, particularly a sales team on the West Coast, and a strong network team in Phoenix, which is by good fortune exactly where we have our own network team.

Miller: But most of the synergies of these companies are in the network, not headcount.

FierceOnlineVideo: These are tough times for CDNs...

Miller: Yeah, it's all about cost of delivery and reserve network capacity. It's hard for CDNs to be profitable in that environment.

Liddell: It a tough time for CDNs that are not profitable. You know the numbers, we're probably one of the most profitable CDNs out there.

Highwinds StrikeTrackerFierceOnlineVideo: Are there more acquisitions planned down the road? Does Highwinds need that to expand?

Miller: We don't need to do anything. We don't need capital. We don't need to make acquisitions.

However it's a very attractive way to grow your business. What we have is a platform for growth, not only from a balance sheet perspective, but from a scalable network perspective. So, if there are network service businesses that have great revenue streams but don't quite have the scale and cost of delivery that Highwinds has, we're absolutely looking at more M&A.

Liddell: One of the exciting things about this merger is that the combined product set is, we're finding increasingly, what our customers are after. It's one thing selling a CDN, but being able to sell customized network services, origin hosting, collocation IP transit, what we're finding is that the CDN business is really just one aspect of the whole content delivery system. So by extending that stack of services much more into the network services area, it means there's much more efficiency in the way you're able to sell, customers have a much fuller suite of product to chose from.

We'll continue to look at M&A opportunities that can add value to that product stack and therefore to our target customers, as well as those that are purely accretive.

FierceOnlineVideo: Highwinds had great analytics right out of the gate. But is that enough? Do CDNs need to offer more?

Liddell: Definitely. Analytics and ease of interaction from the customer perspective is an ongoing theme for us. That is one of the areas where we are currently investing more resources. We've been hiring a lot of developers, a lot of operations people to scale this business, and we continue to see that the front end, interactive analytics function has been very important for our customers. We'll continue to take the lead in that area.

But, longer term, we'll also be including more products into that stack. So that there is more of an ease of use, an ease of interaction for customers who need not just CDN services and the different flavors and variety that that comes in, but a fuller suite of services.