Last week I hosted my annual Content Delivery Summit in NYC, which brought together telecom carriers, service providers, content owners, and Wall Street money managers for a detailed look at the content delivery market. Multiple attendees from Wall Street were there talking about how Limelight Networks (LLNW) is in talks to try and sell the company to Verizon (VZ) and is desperate to make a deal.
While it does not sound like any kind of agreement has been reached, such a deal would make a lot of sense for both companies as Verizon has been trying to get their VDMS business going for a few years now, without a lot of success. They are currently doing another major push right now to jump start the business and acquiring Limelight would give them customers, network resources, and the sales and product support they need. Verizon should be a lot further along with their digital media business than they are right now, and they really need to do a few acquisitions to get there. If they do, there is no reason why they can’t be a real competitor in the market, but I don’t think they can get there on their own simply by building everything in-house for their commercial CDN offering.
I haven’t heard any kind of numbers mentioned of what Limelight would be worth, but their CDN business isn’t in the greatest of shape right now. Multiple customers at the show were talking about poor performance of Limelight’s network for video, and in the last few weeks, Limelight lost more experienced sales people along with other employees. The company stated on their last earnings call that they plan to reinvest in the CDN business and add more capacity, but that it would be toward the end of the year before that is in place.
With Verizon having a new streaming service with Redbox, Verizon needs a better CDN for video delivery ASAP. Acquiring Limelight would give them the foundation for that and something they could build on top of. On paper, the deal makes a lot of sense, but one has to wonder what Limelight's board, and shareholders, want for the company and if they still think it's worth more than it really is. With Limelight having all new management, hopefully they are realistic on the value of the company as Limelight's previous management always thought the company was worth more than it really was, which ended up keeping them out of some potential deals.
In addition to hearing about Limelight and Verizon, one person told me that XO Communications is also in discussions with Limelight. The two companies already work together and last year, XO Communications launched CDN Services using Limelight's managed CDN platform, via Concentric Cloud Solutions, a new division of XO Communications that focuses on content caching, application acceleration, and video streaming. So it's possible that XO now wants to have more control over their CDN and bring Limelight into the fold. For Limelight, this would also make sense from an acquisition standpoint, as XO has more than 60,000 small and medium-sized customers spread out across North America alone.
It's too early to know how this is going to play out, but Limelight Networks is clearly shopping the company, once again, trying to get an acquisition done. Some will ask me how such a deal might impact Akamai (AKAM), but I'm not even going to speculate on that unless we hear a deal gets done.