Limelight Shares Plunge on Revenue Issues

With investors already on edge about growing competition in the CDN sector and Wall Street on edge, Limelight Networks (LLNW) picked a bad day to lower its revenue guidance for the coming quarter and full year. Limelight shares plunged in the wake of the news, falling to $9.40 in afternoon trading, down $5.40 (36.5%) for the session. Limelight went public June 10 at $15 a share in an IPO that made headlines as LLNW shares jumped to $24.33 in that aopening session before falling back to close at $22.

Limelight said Thursday it expects earnings in the third quarter and year to fall short of Wall Street estimates. Revenue for the third quarter is pegged in a range of $25.5 million to $28 million, depending on whether a five-year contract is included. For the full year, revenue is seen between $101 million and $105 million on the same basis. According to Thomson, analysts forecast revenue of $28 million in the third quarter and $109.2 million for 2007.

The plunge in Limelight’s stock price follows a sharp selloff for shares of market leader Akamai (AKAM), which has seen its stock price collapse from $50 on July 19th to just $33 earlier this week. Akamai now seems to be benefiting from investor concern about Limelight, with shares gaining 88 cents today to $35.57, a gain of 2.5%.

New entrants in the content delivery network (CDN) market, including Panther Express and Edgecast, have heightened existing concerns about pricing and margins in the CDN business. Another company, Digital Fountain, indicated today that it plans to enter the CDN market in early 2008.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.