Limelight Raises Cash, Could Go Shopping

Mar. 8.11 | About: Limelight Networks, (LLNW)

Fresh off its recent secondary, Limelight Networks (NASDAQ:LLNW) could well look to put some of that recently raised cash to work in some shopping trips. (It now has more than ample resources. Last week’s offering netted Limelight $77m, essentially doubling its cash holdings.) If it does look to do a deal or two, we expect that Limelight’s next acquisition will complement its core content delivery network (CDN) business. The company has already been broadening the range of services it can provide in the video ecosystem, most notably with the $110m purchase of EyeWonder’s ad campaign creation business in December 2009 and most recently with the tiny acquisition of Delve Networks, a provider of online video platform services.

One area Limelight could buy into is peer-to-peer (P2P) delivery, since the CDN industry is facing growing concerns about the ability to manage increasing loads of Internet video traffic. There are some providers making a go of P2P by creating tools and services around P2P-assisted game delivery, including Pando Networks and Solid State Networks, that would complement Limelight’s HTTP delivery service. Limelight could also take a look at Octoshape, which has done a significant amount of work in live video transport via P2P-assisted delivery. Octoshape’s service can utilize multiple cloud platforms to scale video-streaming delivery – so even if Limelight isn’t used as the origin CDN, it could gain a tool for providing extra streaming capacity to content owners dealing with delivering large events (think the Olympics or World Cup Soccer) to massive audiences that might wind up overwhelming even the largest CDNs.

If Limelight continues to structure its purchases as it historically has, the company could use its cash and securities to make a fairly large acquisition. To date, slightly more than half (57%) of the $117.6m Limelight has spent on M&A has been in cash, with the remainder in stock. Combine that structuring with the nearly $150m of cash and marketable securities Limelight now holds, and it could wield $300m in buying power. However, the company would obviously have to temper any equity use so it wouldn’t significantly dilute existing shareholders. And we would add that Limelight’s shareholders are a fairly satisfied bunch, with the stock having doubled over the past year.