Writer’s Strike Costs Limelight $1 Million

Content delivery network provider Limelight Networks (LLNW) said that the Hollywood writer’s strike will cost it $1 million in revenue for the first quarter of 2008, as media companies scaled back their spending plans for the long haul. Although the strike has now been settled, uncertainty about the pace of content delivery for new TV shows was one of the factors that prompted Limelight to reduce its revenue guidance to a range of $30 million to $32 million. Wall Street analysts had been expecting revenue of $33.2 million. It’s interesting that the writer’s strike doesn’t seem to have had the same kind of impact at Akamai (AKAM).

Limelight also missed its fourth quarter numbers, reporting revenue of $29.1 million, while the Street was expecting $29.92 million.

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.

Limelight Shares Drop, No MSFT Bid Seen

As it turns out, Microsoft (MSFT) was preparing an acquisition offer for an Internet company. It just wasn’t Limelight Networks (LLNW), despite persistent rumor reports from Silicon Valley Insider and others. Microsoft’s $44 billion takeover bid for Yahoo (YHOO) seems to rule out an acquisition of Limelight as well.

With a potential deal premium seemingly gone, shares of Limelight are down 8 percent in early trading at $6.12 a share, down 54 cents. Eric Savitz at Barron’s reports that Jefferies & Co. analyst Katherine Egbert has cut her rating and price target for the content delivery network (CDN) operator, citing pricing pressures and the reality that a deal now “seems remote.”

Microsoft-Limelight Deal Rumors Persist

Henry Blodget at Silicon Alley Insider has another post today about rumors that Microsoft (MSFT) will acquire Limelight Networks (LLNW), citing a second source. Henry first wrote about this last Friday, about the time we noted that Microsoft is building its own content delivery network (CDN) infrastructure using technology it licensed from Limelight.

Blodget’s latest update suggests a possible synthesis of the buy vs. build scenarios: “Our source believes Microsoft also wants to own and operate its own CDN architecture and sees Limelight as a quick solution to the CDN piece of the puzzle,” he writes.

We know Microsoft is working on its own CDN infrastructure. They’ve said that. What’s unclear is whether the persistent rumors about an MSFT-LLNW deal is just market chatter generated by a misunderstanding of the two companies’ existing relationship, or represents a genuine interest by Microsoft in purchasing its partner.

Limelight Networks Responds to Level 3 Suit

Content delivery network provider Limelight Networks (LLNW) issued a press release Monday confirming that Level 3 Communications (LVLT) has filed a patent infringement lawsuit against the company, and addressed Level 3’s assertions:

Limelight Networks is aware of the allegations made against it, believes that these allegations are without merit, and intends to defend itself vigorously. Limelight Networks confirms that it respects the intellectual property rights of others and does not knowingly make use of any third party intellectual property without consent or authorization.

As we noted last week, Level 3 is asserting that Limelight is infringing patents that Level 3 acquired when it purchased a content delivery network from Savvis Communications (SVVS) earlier this year. Limelight is also defending itself against a patent infringement suit filed by Akamai Technologies (AKAM).

Level 3 Sues Limelight Over CDN Patent

Level 3 Communications (LVLT) has filed suit against Limelight Networks (LLNW), asserting that Limelight is infringing patents that Level 3 acquired when it purchased a content delivery network from Savvis Communications (SVVS) earlier this year. The lawsuit makes more work for lawyers at Limelight, who are already litigating patent infringement claims with CDN market leader Akamai Technologies (AKAM) in a case that may go to trial this year.

The suit was first reported by Dan Rayburn, who noted that Level 3 mentioned patents when it acquired the Savvis CDN network. The news doesn’t seem to have had much impact on shares of Limelight, which have recently been trading between $7 and $8 a share. Limelight went public at $15 a share in a June IPO that saw its shares trade as high as $24. But the stock took a major hit in August when it lowered its revenue guidance, and has traded in single digits ever since.

Microsoft Picks Limelight for Content Delivery

Microsoft has picked Limelight Networks (LLNW) to power enhancements to the software giant’s huge content delivery and streaming media infrastructure, the two companies announced today. Limelight’s CDN network will be used to improve the scalability of Microsoft’s online services, helping speed delivery of video, music, games, software, and social media. Under the agreement, Microsoft (MSFT) and Limelight will cross-license some technologies, and “cooperate on extending and improving their respective technology infrastructures.”

The agreement is aimed at “radically improving user experiences” across Microsoft’s media properties, which serve 460 million unique users per month worldwide. The companies said the multi-year agreement will allow them to take a long-term approach to enhancing Microsoft’s ability to deliver streaming content.

“Our agreement with Limelight Networks anticipates Internet audiences and content offerings that are orders of magnitude larger than today,” said Debra Chrapaty, Corporate Vice President of Global Foundation Services for Microsoft. “Today’s digital media initiatives only hint at the full potential of the Internet as a channel for distribution of traditionally produced content and as a platform for the creation of new forms of media and entertainment content.”

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.