The hot topic in the internet industry this week is the $40m acquisition of Netspace by iiNet. On today’s Twisted Wire Michael Malone, CEO of iiNet, says we can expect more acquisitions down the track, but not in the very near future.
I ask him about the real motives behind the purchase and other potential acquisitions down the track. Can they sustain the current level of growth? What happens when they run out of companies to buy?
Nigel Pugh, a telecommunications analyst at Ovum, says there are still companies to buy, but they have to choose the right targets. Netspace was the right size for iiNet, he says on Twisted Wire, but there’s not many others like it.
The move has certainly been popular with investors. There has been a sharp rise in the share price this week and it is heading back to the peak levels of five years ago. Ian Martin, a financial analyst at the Royal Bank of Scotland, talks favourably of the company’s move in this week’s edition of the program. He says the company is trading at a realistic level these days.
As to where next, I ask Paul Budde what a company like iiNet does to avoid becoming a low margin utility player. He says they don’t have to go as far as being a content provider.
Instead they need to rise above the network layer to embrace cloud computing by enabling applications. That makes me think that perhaps in the mid-term acquisition targets might be more application service provider than internet service provider, after Michael Malone has hit his customer targets of course.