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."
Apparently Akamai can't continue that investment and still meet its revenue guidance without cutting costs. It's often been observed that Akamai is a different animal from many newer players in the CDN market, with a more mature set of enterprise services and extensive physical infrastructure.
But the market forces compelling Akamai to cut back are likely to be felt by other CDN providers as well, albeit with different intensity and in different ways. Hard times often prompt a flight to quality, as customers shift business to trusted brands with financial strength. In the content delivery business, that's Akamai.
Will this trend hold true in the CDN sector? The entry of Verizon (VZ), AT&T (T), Level 3 (LVLT), Amazon (AMZN) and Rackspace (RAX) into the CDN business offers alternatives to the dozens of venture-backed startups seeking to take on Akamai and Limelight Networks (LLNW). Interesting times are surely upon the CDN industry.