Akamai Up On Idle Chatter

Akamai, a leading content distribution network, saw its stock jump almost 6 percent to about $23.97 a share today, leading to speculation by some blogs that the company might be takeover bait. Prompting this talk is the company’s market capitalization of around $4 billion.

The whole fracas today is nothing more than a tempest in a teapot, and I am not putting much credence to this talk. Why? First, the stock has already started to come down. Secondly, today’s trading volume isn’t too different from an average daily volume of Akamai stock trading.

More importantly, Akamai has come through a really rough patch and is starting to move in the upward direction. The company management is loathe to sell and more acquisitive in nature. If you follow the industry long enough, like I have, then you know that there is a rumor a week when it comes to Akamai and Limelight Networks. The whole thing feels like one big circle jerk.

Regardless, this chatter brings up the big question: Who will buy Akamai? In the past there were some serious talks between Akamai and AT&T, but they didn’t go anywhere. AT&T is launching its own CDN efforts, though it is hard to tell if it had any impact on Akamai’s business.

Given its interest, AT&T could come back to the table. Thinking beyond AT&T, other suitors for Akamai could include Level 3, Verizon, Comcast or some international telecom operators. Cisco, Microsoft and Google could throw their hats in the ring. Akamai has an enviable infrastructure and still remains a dominant player in the CDN business.

Limelight’s Still Shining

Limelight may soon be out of the frying pan and into the fire. Katherine Egbert, an analyst with the investment bank Jefferies, issued a report today saying she thought a federal judge would decide quickly and in favor of Limelight with regards to a patent infringement suit filed against the content delivery network by rival Akamai.

But Egbert thinks that even if Limelight wins, a buyer will swoop in to snap it up. Unfortunately she thinks many on her list of buyers, which includes AT&T, Level 3 and Akamai, are likely to move Limelight’s customers over to their networks and shut Limelight’s down.

Four months ago a jury in the U.S. District Court of Massachusetts awarded Akamai $45.5 million after it found Limelight guilty of infringement. Yesterday evening a federal court judge gave Limelight Networks a little breathing room in the patent fight by holding off on a permanent injunction that could shut down half of Limelight’s business. The judge is waiting to decide on the rest of several motions before her in the case, and said a favorable decision for Akamai in the other motions might lead to a permanent injunction.

Typically the process of hearing and deciding motions can take a few days to a couple of months, so shareholders are probably hoping Egbert’s conclusions are correct, especially the ones that see Limelight selling for $6 to $7 per share. That’s a far cry from the stock’s $23.82 high last summer, but it’s about where it was trading right before it was socked with the $45.5 million judgment.

Limelight Getting Dimmer?

After losing an infringement case brought against it by fellow content delivery network Akamai, Limelight Networks is going all out to reassure its customers that the $45.5 million judgment against it was merely a flesh wound.

In a letter posted to the company’s web site (and sent around to the media), Limelight notes its $197 million in cash on hand and explains why it’s waiting to file an appeal. All fine, but the admission that it’s working on a way to operate without infringing the Akamai patent means that this flesh wound is more akin to having a leg chopped off.

“Further, we are actively exploring alternatives that would enable us to continue to provide the same level of service that we always have and eliminate any issue of infringement, if such is determined with finality by the courts. Additionally, there are many aspects of our business that were either not accused of infringing or we believe are clearly outside the scope of what was litigated.”

The very existence of the letter indicates that customers are concerned. Shares in Limelight have dropped more than 35 percent since the Feb. 29 verdict, so now might be a good time for a deep-pocketed buyer with a fearsome legal team to step in.

Surprise! Limelight Will Appeal Akamai’s $45.5M Patent Win

Like a ballet, a patent lawsuit has dozens of carefully orchestrated steps, and today’s judgment against Limelight Networks marks the beginning of the exciting part of the show, which could drag on for years, or get cut short by a settlement. Earlier today a jury in the U.S. District Court of Massachusetts found Limelight guilty of infringing four of claims in one of Akamai’s patents, and awarded the wronged content delivery network $45.5 million in damages.

Akamai also said it would seek an injunction to stop Limelight from continuing to sell infringing services. Limelight issued a release saying it was disappointed and would appeal the verdict, which means a trip to Washington’s U.S. Court of Appeals. For a program guide to how this may play out, see our previous coverage of the Verizon/Vonage patent lawsuit.

Limelight Dims, Blames the Writers

Remember all those stories and reports about how the writers’ strike was driving TV viewers over to the Internet? Limelight Networks wants you to forget them.

After posting a larger-than-expected loss for its most recent quarter, Limelight says the current quarter won’t be much better. Why? It’s those pesky picketing writers, who are costing Limelight $1 million this quarter in lost business. And they’ll cost Limelight millions more this year, even though they went back to work last week.

Limelight, which like Akamai makes money by shuttling high-bandwidth digital content around the Internet, said big customers are trimming their online spending until the release of new programming returns to normal.

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It’s 2008 — Do You Know Where Your Internet Cables Are?

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India lost half its Internet capacity on Wednesday when two strands of fiber as thick as a thumb snapped. While service is returning to normal, it may be weeks before the cables are repaired. The fact that a pair of central Internet paths are just 2 km apart should serve as a cautionary tale as to just how fragile the Internet can be.

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Limelight’s Share Surge: Don’t Celebrate Yet

Content delivery network Limelight Networks’ shares surged nearly 20 percent Friday after saying it expects fourth-quarter revenue to come in at the high end of its previous guidance. The bad news is that the sales are estimated to range from $29.3 million to $30 million, essentially flat compared with the previous quarter.
Given that there’s a price war among the big CDNs, a war that last fall prompted Level 3 to announce it would take its CDN prices to about half the going rate, Limelight’s (LLNW) stable sales may be largely due to deep discounting. As Limelight spends about 60 cents on every $1 it earns just to provide service, whereas Akamai spends about 30 cents, I’m not sure how low Limelight can go. Or for how long.

Yes, VeriSign CDN Business Is Indeed on the Block

William Roper Jr., the new chief executive officer of Mountain View, Calif.-based VeriSign, wants to streamline the company by selling off non-core businesses. His plan — sell or shut down, something I first reported back in August. At the time, VeriSign had no plans to sell off its content delivery network business, but it seems like things have changed.

Roper Jr. recently outlined his plan for Wall Street analysts and investors. His presentation prompted Dan Rayburn to do some digging and report that VeriSign’s Kontiki CDN business was up for sale as well, with Limelight Networks as one of the potential acquirers.

While VeriSign stated that it would review its content delivery offering over the next six months and decide whether or not to keep it, the CDN business is already being shopped around to other CDNs and content companies who many want to own their own network.

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