Q1: What is the nature of the problem that Cachet Technologies is addressing? Is it a big problem? Is there any competition? The company proposed a new way to distribute content over the Internet. The reason why this technology is invented is a real problem related to the Internet. The main problem is that existing routing systems on the Internet are not able to serve new needs of consumers. Consumers moved to more sophisticated multi-media applications and routing system became overloaded. It resulted with delays in the system and slowness of the web in peak periods. This problem is big and important. As the promise of Internet was to represent global, interactive, transactive new medium, due to this problem this promise and function of Internet was not able. If it is not possible to serve huge number of users in peak period, than how Internet could be global, new and different than other mediums. The benefits and advantages of Internet were not able to be used due to the nature of this problem. Internet has limitations due to “hot spot problem” when a lot of users access the system. Cachet Technologies does not have direct competitors who offer solutions with the same benefits and advantages. Catchet Technologies’ spftware represented a dramatic improvement over alternative solutions in the marketplace. However indirect competitors exist. They differ in the way how they approach the problem and which advantages and disadvantages they offer. As a substitute for Cachet Technologies, ISPs (Internet service providers) could invest in infrastructure to build their system to accommodate larger network. However, this is very expensive and time consuming. The other possible solution is mirroring. The entire content of a particular web site would be replicated on a number of different serves at different locations. This is also costly, time consuming and with low level of efficiency. Another potential competitor technology is caching. Companies, such as CacheFlow, Inktomi, and Netchache had software that enables large-scale data replications and storing of a web site on servers that were closer to the users. Inktomi solution was the most comparable product with Cachet Technologies product. Their disadvantage is not being able to provide load balancing.
Q2: How big could Cachet Technologies be in two years? Five years? Ten years? As the case mentioned, Cachet Technology applies their product at strategic points in the ISP network. This means, ISP can provide better service with relatively low cost to their customers. From exhibit 8, we assume that it maintains its 2001 penetration rate (#buy T3/relevant market size) at 25% in 2008. And we can estimate the future sales based on the potential market size. Potential Market Size=Global +National
Penetration of potential market= Total T3 sales/Potential Market Size Revenue=Total T3 Sales* Price per T3
| 2001| 2002| 2003| 2004| 2005| 2006| 2007| 2008| global market| 963| 1746| 3167| 5744| 10417| 18892| 34262| 62137| national market| 1121| 1480| 1954| 2580| 3407| 4499| 5940| 7843| Potential market size| 2084| 3227| 5122| 8325| 13824| 23391| 40202| 69980| Penetration of potential market| 25%| 25%| 25%| 25%| 25%| 25%| 25%| 25%| Total T3| 516| 807| 1280| 2081| 3456| 5848| 10051| 17495| Price per T3| $73,509 | $69,834 | $66,342 | $63,025 | $59,874 | $56,880 | $54,036 | $51,334 | Revenues| $37,930,696 | $56,331,312 | $84,945,087 | $131,163,692 | $206,930,028 | $332,621,053 | $543,093,933 | $898,089,942 |
Q3: How much is Cachet Technologies worth? How do you decide? We listed 4 competitors and their financing data based on the given numbers in Exhibit 3.. We used Cacheflow and Inktonmi as the reference to estimate the worth of Cachet Technologies. In our opinion, these two companies not only provide similar product/service but also have been through similar...