Limelight Explores Alternatives on Patents
In an open letter to reassure customers about its future, Limelight Networks (LLNW) says it has no plans to scale back its operations and will "vigorously defend" the company's position in an appeal of its recent court loss to Akamai Technologies (AKAM).
On Feb. 29 a Massachusetts jury awarded Akamai $45 million in damages from Limelight 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. The verdict prompted speculation that Limelight faced a network shutdown (a prospect the company itself raised in SEC filings about the Akamai case) or be acquired by a competitor. Noting these rumors, the company addressed its customers directly:
We have no plans to discontinue operations. We are financially strong with approximately $197 million of cash and marketable securities on our balance sheet as of the end of 2007, and no material debt. Further, we are actively exploring alternatives that would enable us to continue to provide the same level of service that we always have and eliminate any issue of infringement, if such is determined with finality by the courts. Additionally, there are many aspects of our business that were either not accused of infringing or we believe are clearly outside the scope of what was litigated.Read the entire letter on Limelight's web site (link via GigaOm).
Posted by Rich Miller 
March 11, 2008 | Permalink | Newsletter
February 27, 2008
More Limelight Buyout Rumors
Henry Blodget at Silicon Alley Insider seems convinced that someone should buy content delivery network Limelight Networks (LLNW), but the likely acquirer seems to be a moving target. After a series of posts predicting Limelight would be bought by Microsoft (MSFT), Blodget now speculates that Level 3 (LVLT) may be a bidder and that a deal "might happen sooner rather than later." Interestingly, Blodget acknowledges that his source "has no information here: s/he is just putting two-and-two together."
I've been skeptical about the reports that Microsoft would acquire Limelight, since the two companies are already partnering on Microsoft's expansion of its own CDN infrastructure. It has certainly occurred to industry watchers that Level 3, which wants to grow its CDN business, might covet Limelight. But recent events suggest Level 3 may be taking a break from additional acquisitions, as Dan Rayburn notes in the comments at Silicon Alley Insider:
Level 3 buying Limelight is not a bad idea, but at this time, I don't think Level 3 shareholders would let Level 3 buy any more companies considering how many they have bought recently and how much pain they have experienced integrating them into Level 3. And with Goldman holding 35+ million shares and probably looking to get back to at least even to the IPO price, Limelight would have to get sold for some where around $500 million for that to happen.
Posted by Rich Miller February 27, 2008 | Permalink | Newsletter
February 19, 2008
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.
Posted by Rich Miller February 19, 2008 | Permalink | Newsletter
February 05, 2008
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.
Posted by Rich Miller February 05, 2008 | Permalink | Newsletter
February 04, 2008
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."
Posted by Rich Miller February 04, 2008 | Permalink | Newsletter
January 18, 2008
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.
Posted by Rich Miller January 18, 2008 | Permalink | Newsletter
January 02, 2008
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).
Posted by Rich Miller January 02, 2008 | Permalink | Newsletter
December 26, 2007
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.
Posted by Rich Miller December 26, 2007 | Permalink | Newsletter
August 23, 2007
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."
Posted by Rich Miller August 23, 2007 | Permalink | Newsletter
August 09, 2007
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.
Posted by Rich Miller August 09, 2007 | Permalink | Newsletter
July 09, 2007
Limelight to Power GameShadow
Game download service GameShadow has selected Limelight Networks (LLNW) as its exclusive provider of content delivery network (CDN) services, the companies announced today. GameShadow software allows gamers to track the latest patches and driver updates for their games. The company's "intelligent client" has been downloaded by more than 750,000 gamers, who are served targeted advertising while choosing updates.
"When growing the GameShadow service, it became clear that we had a reputation to uphold and our original file serving system was beginning to show strain under the load," said Tony Treadwell, COO and Founder of GameShadow. "We needed a scalable and high-performing multi-access-point network that would allow all of our customers worldwide to experience the best possible delivery speeds."
Posted by Rich Miller July 09, 2007 | Permalink | Newsletter
June 10, 2007
Limelight: Return of the First-Day IPO Pop
It's been a while since we've seen conspicuous first-day pops in the share prices of IPOs. Limelight Networks (LLNW) had all the marks of a hot IPO: the pricing was raised from $12 to $14 the day prior to trading, and again to $15 when the shares hit the market. Once LLNW began trading, it shot as high as $24.33 before closing at $22.18, up 48 percent on the session.
Limelight's strong debut came a day after shares of optical networking firm Infinera Corp. jumped 52 percent in its NASDAQ trading debut, which prevented LLNW from being the strongest first-day gain of a tech IPO this year. Limelight raised $240 million in its IPO, selling 16 million shares (12.5 million offered by the company, and 3.5 million by shareholders) for $15 each. Limelight, which operates a content distribution network (CDN), will net $170 million of the proceeds. It will use the money to fund capital spending and pay off $23.8 million in debt.
It shouldn't come as any surprise that Limelight's IPO went well, even though the company has yet to turn a profit. The CDN market leader, Akamai Networks (AKAM) has been one of the hot stocks in recent years, gaining 166 percent in 2006. Limelight has Web 2.0 sexiness from a customer list that includes YouTube, Facebook, Metacafe and Brightcove. With the huge growth trends of online video and MMORPGs/virtual worlds, it's clear that there's plenty of business going forward in the content delivery market.
Posted by Rich Miller June 10, 2007 | Permalink | Newsletter
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