Akamai Cuts Costs, Lays Off 110 Employees

Content delivery market leader Akamai Technologies (AKAM) has laid off 110 employees in a move to shift spending from personnel to investments in technology and international expansion. The company will take a $4 million restructuring charge to cover severance, and will also take a $2.5 million charge related to a real estate loss.

The layoffs took place today, and were spread across all divisions and regions. The cuts equate to 7 percent of Akamai’s workforce.

Akamai insists the cost-cutting moves are strategic, and don’t reflect a deterioration in its content delivery business. “We have not changed our business outlook,” said JD Sherman, CFO of Akamai. “However, we want to ensure that we can keep investing for growth even in the current economic climate.”

Epic Web Traffic for Obama Victory, Akamai Says

Internet traffic surged to historic highs last night as Sen. Barack Obama clinched victory in the 2008 U.S. Presidential election, according to data from Akamai Technologies, which operates the world’s largest content delivery network. Traffic to news sites using Akamai’s network reached 8.57 million visitors a minute at 11 pm, when Obama was projected as the President-elect after polls closed in California.

That figure easily topped the previous high water mark of 7.28 million visitors per minute for the 2006 World Cup. While Akamai has been publishing its data on its Net Usage Index only since 2005, the growth in Internet usage and traffic over the past three years makes it unlikely that earlier events would reach similar peaks.

Akamai, Limelight Both Object to CDN Study

Rival content delivery networks Akamai Technologies and Limelight Networks finally agree on something: they both take issue with the methods used by researchers from Microsoft and NYU in a study on CDN performance published last week. The study found small performance differences between the two CDN providers in North America, but a “big gap in performance” in Europe and Asia, where Akamai has more data centers than Limelight. It also suggested Limelight might be able to equal Akamai’s performance with as few as five additional data center locations.

Both Limelight and Akamai say the researchers were measuring entirely the wrong thing, and Akamai says most of its conclusions are false. Akamai’s full response is posted at Dan Rayburn’s blog, while Limelight has posted its analysis on its company blog, In The Limelight.  

CDN Pricing Trends Hurt Akamai Shares

Shares of content delivery market leader Akamai (AKAM) are off about 9 percent this morning on concerns that industry pricing pressures will hurt the company’s performance. Several securities analysts analysts downgraded Akamai, and the company’s shares are trading down $1.52 at $15.60, a decline of 8.9 percent.

The downgrades followed the release of the latest CDN pricing survey by Dan Rayburn at StreamingMedia.com. Rayburn noted that pricing was lower for customers with average bandwidth capacity requirements, and that Akamai’s pricing remained higher than other providers.

“In the last two weeks, I have seen three RFPs where the major CDNs all bidding on the business were priced within four cents of each other,” Dan writes. “The exception to the rule was Akamai who was coming in at almost double to what all the other CDNs were charging and it should be noted, did not win any of those three deals.”

Akamai Miss: Blame Broadband or Competition?

Shares of Akamai (AKAM) plunged 23.5 percent Thursday after the company reported subpar earnings and lowered its full-year sales and profit guidance. That prompted a decline of $7.91 to $23.34 a share. Akamai shares have been beaten up before, but today’s discussion quickly focused on the company’s rationale for its earnings miss. A roundup:

• Dan Frommer from Silicon Alley Insider summarizes the company’s explanation: that customer traffic growth is slowing. “What will pick up the pace for Akamai? When Web video quality increases - so Akamai can push streams and video files that are relatively larger.”
• That account didn’t fly with Ryan Lawler at Contentinople and the sources he polled: “But some analysts and competitors say they’re not seeing the same weakness in media and entertainment. That’s causing some to speculate that Akamai is just being coy about competitive pressures that it’s facing.” A relevant quote from Wedbush Morgan Securities analyst Kerry Rice: “I’ve talked to a lot of the CDNs, and not one of them said, ‘We’re seeing traffic volumes slow.’”
• Dan Rayburn at the Business of Video agrees that Akamai’s explanation isn’t adding up. “I listen to all of the CDNs quarterly calls and have to admit that last night, Akamai delivered a very confusing message. On one hand they said traffic was still growing, but not as fast as before and that pricing for CDN remained stable. But on the other hand, blamed the economy and lack of broadband speeds for the reason content owners are not spending more money to deliver more content, which created less growth. That does not make sense.”

Akamai Turns 10

Content delivery pioneer Akamai Technologies (AKAM) is celebrating the company’s 10th anniversary today, and has published a Netrospective that highlights many of the major Internet traffic milestones over the past decade, from the famed Victoria’s Secret Web traffic jam in 1999 right through the recent Middle East cable cuts.

Akamai’s infrastructure has grown to the point where it has 30,000 servers in 70 countries within nearly 1,000 networks. The company estimates that 85 percent of the world’s Internet users are within a single “network hop” of an Akamai server. That infrastructure serves more than 300 billion requests per day, according to a company fact sheet.

Akamai Had Hoped for $100M-Plus Award

Xconomy has some additional details about Friday’s jury verdict that awarded Akamai (AKAM) $45 million in damages from Limelight Networks (LLNW) in a patent dispute. The jury found that Limelight’s content delivery technology infringed on Akamai patent 6,108,703, known in the industry as the “703″ patent. Xconomy reports that the verdict “was not the huge win Akamai hoped it would be” since additional elements of the company’s case against Limelight had been thrown out weeks earlier. An excerpt:

Akamai had hoped for a much larger damage award, according to (Akamai spokesman Jeff) Young. “I can’t really comment on the specific amount, but we believe the evidence showed at least a nine-figure damage number.”

Nine figures is $100 million. Instead, the jury found damages to Akamai of $45.5 million, including $40.1 million for profits lost as a result of Limelight’s infringement, a royalty of $1.4 million, and a further $4 million to compensate Akamai for price erosion caused by competition from Limelight. Xconomy has obtained the jury form that itemizes the verdict, and posted it online.

Akamai Wins Patent Case With Limelight

Akamai Technologies (AKAM) has prevailed in its patent infringement case with rival Limelight Networks (LLNW), which has been ordered to pay damages of $45.5 million, Akamai announced today. Shares of Limelight plunged $1.97 to $4.40 a share after the ruling was announced, a drop of 31 percent. Akamai jumped $2.43 to $35.91, a jump of 7.3 percent, in late afternoon trading. Akamai said it will ask the Court to issue a permanent injunction prohibiting Limelight from infringing the patents, which Limelight has said could force it to shut down its CDN service.

“We are extremely pleased with the jury’s verdict,” said Melanie Haratunian, senior vice president and general counsel of Akamai. “Today’s ruling recognizes the strength of Akamai’s patent portfolio and is a tangible reflection of our resolve to vigorously defend the Company’s intellectual property.”

“We are disappointed with the jury’s verdict in this matter,” said Phil Maynard, chief legal counsel for Limelight. “We strongly believe that, like other companies that follow long-established Internet standards, we do not infringe the patent in this case. We will continue to remain a competitive choice in the marketplace as we pursue all appropriate legal avenues.”

In its most recent SEC filing, Limelight stated that “an unfavorable outcome could seriously impact the Company’s ability to conduct business” and that “a permanent injunction could prevent us from operating our CDN altogether.”

Akamai Gains on Strong Earnings

Shares of Akamai (AKAM) surged higher today, boosted by a strong earnings report and evidence that concerns about price wars in the content delivery market are overblown. Akamai shares rose $2.68 to close at $32.41, a gain of 9 percent on the day.

On Wednesday Akamai reported that its annual revenue grew 48 percent in 2007, with revenues of $636 million for the year. Despite growing competition in the CDN market, customers are spending more money with Akamai, with average revenue per customer up 12 percent from the previous quarter and 22 percent from the year-earlier period. Akamai now has more than 100 customers who spend more than $1 million a year on its services.

Akamai customers are spending more because their businesses are growing. “As more and more entertainment content and games are going online, it drove really tremendous results for us,” President and CEO Paul Sagan said during Akamai’s earnings call with analysts. “We saw it across many verticals, but the two most important were e-commerce and the media and entertainment, even beyond expectations. I think that we are seeing a steady growth of entertainment content moving to an IP world. I just think you continue to see adoption of the Internet and it creates this virtuous spiral upwards right now.”

Akamai-Limelight Suit Streamlined

Dan Rayburn at the Business of Online Video reports a development in the patent infringement lawsuit between Akamai (AKAM) and Limelight Networks (LLNW), the two leading players in the content delivery network business. Dan says the court has streamlined the case, issuing a preliminary ruling focusing on a single Akamai patent, effectively setting aside issues related to two other patents. We’ll update once more information is available.