Back to top

Analyst Blog

Akamai Technologies Inc. (AKAM - Analyst Report) has agreed to acquire Verivue, a provider of IP platforms and solutions for network operators. The acquisition will enable Akamai to strengthen its cloud infrastructure solutions portfolio. Akamai expects to close the deal by the end of this year, but the financial details were undisclosed.

Verivue’s solutions enable faster delivery of content for network service providers. Verivue, with its OneVantage Content Delivery Solution, provides a compact and cost-effective content delivery network (“CDN”) infrastructure solution for network providers. Verivue’s global distribution partners include Nokia Siemens Networks, Ericsson, NISSHO ELECTRONICS and Arris.

Along the same lines, Akamai had acquired FastSoft (in September 2012) and Cotendo (late 2011). We believe that these acquisitions not only broaden Akamai’s CDN solutions portfolio, but also provide the company with a significant competitive edge over other established CDN providers such as Limelight Networks Inc. (LLNW - Snapshot Report) and Level 3 Communications Inc. (LVLT - Snapshot Report). Akamai can also enjoy competitive advantage over new entrants like CDNetworks, AT&T Inc. (T - Analyst Report) and Verizon Communications Inc. (VZ - Analyst Report).

They will also have a positive effect on Akamai’s cloud optimization solutions. Cloud infrastructure solutions contributed approximately 58% of Akamai’s total revenue in the third quarter of 2012. While revenue from cloud infrastructure solutions increased 22.0% year over year, content delivery solutions jumped 23% year over year driven by increased demand for optimization, performance and security solutions, and strong traffic growth.

On a positive note, Gartner expects the cloud services market to grow over 3 times by 2015 to $177.0 billion. According to market research firm IDC, spending on public cloud services is expected to reach $100.0 billion by 2016. This tremendous growth potential and the rapid adoption of cloud technologies will particularly help Akamai’s enterprise business in the long run.

Akamai has a strong presence in the content delivery market. However, intense competition has forced it to lower the price of its content delivery network services, particularly the digital media services, which will hurt its margins. Moreover, increasing total bandwidth costs remain a headwind for Akamai in the long run.

We maintain our Neutral recommendation on Akamai over the long term (6-12 months). Currently, Akamai has a Zacks #2 Rank, which implies a short-term Buy rating.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SYNAPTICS I… SYNA 78.11 +8.14%
GREEN PLAIN… GPRE 39.41 +5.12%
PILGRIM'S P… PPC 28.82 +3.08%
SKYWORKS SO… SWKS 52.07 +2.58%
CLAYTON WIL… CWEI 109.08 +2.51%