Talk yesterday surfaced about Akamai (NASDAQ:AKAM, news, filings) as an acquisition target, with the likes of IBM and Verizon being the most likely suspects. The reason behind the speculation does not appear to be actual rumors about talks, but rather the fact that Akamai's stock price has fallen far enough to draw attention. But I just don't buy it.
For the talk to amount to anything, Akamai would have to be willing to sell at a low point, and I don't think they're near that threshold. Also, any buyer would have to have a plan going forward that would do better than Akamai already is. I don't see that IBM would bring much to the table here. They might like to own it at the right price, but I'm not sure what they'd actually do with it. I suppose Verizon could see an opportunity to meld the CDN with its Tier 1 network, but there are risks to that approach too. Because Akamai is king of the hill, it's hard to improve on and easy to screw up.
On the contrary, I think it more likely that Akamai does some buying of its own. While competition has been pressuring the company's margins, those margins are still huge and the profits impressive. They have a low cost of capital, and could find a transformational acquisition of their own out there. As Dan Rayburn has suggested, they might go after a licensed CDN or federated capability. Or they could go after network infrastructure in some form, perhaps taking out a substantial Tier 1 backbone themselves. Or they could even go cloud-nova on us and buy Rackspace or something.
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