Well, the rumors turned into reality this time, as this mornings headlines have Akamai (NASDAQ:AKAM, news, filings) signing a definitive agreement to buy upstart competitor cotendo. Talk of such a deal started bubbling up after Thanksgiving, and there were solid strategic reasons behind the combination. But the rumored price tag overshot the mark slightly, as Akamai will be paying $268M net cash to make the deal happen. That's still a nice payday for Cotendo's backers, who put in rather less than $40M by my count.
Cotendo has been driving innovation at the high end of the CDN marketplace with its integrated web and mobile acceleration services. Back in April they introduced Cloudlets, which allowed customers to push not only content to the edge but also custom code execution. Then in June they raised an additional $17M as they unveiled a mobile-focused suite that was built from the ground up.
For its part, Akamai has been working doggedly to tranform its business into a cloud-based managed services company that also happens to run the largest content delivery network. Commoditization at the lower end of the CDN space had made a move up the food chain a necessity as competition had cut into the company's growth. But challenges from the likes of Cotendo at the high end of the market were squeezing things more than a little bit. Acquiring the source of that competition clears things up a bit, and brings in their customer and partner list - especially that big AT&T relationship.
The deal is expected to close in the first half of 2012. By the time it does, it could be that we have more consolidation to talk about in the CDN world. Certainly Limelight Networks (NASDAQ:LLNW, news, filings) is still trying to figure out what path to take. The rumored talks between them and Level 3 Communications (NYSE:LVLT, news, filings) will no doubt become even more rumored over the next few weeks.
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