Very Tough Road Ahead for Limelight Networks

Akamai, EdgeCast, Fastly, Yottaa, Instart Logic, CloudFlare and Incapsula are all making lots of noise in the press about their vision, customer wins, strategies, features, roadmaps, and so on. However, in the land of Limelight Networks (LLNW), it’s so quiet you can hear the crickets in the background. It’s much better to see LLNW making very risky bets in acquiring companies, only later to sell them at significant losses, than it is to see them do nothing. Something is better than nothing. By mid-year Netflix is gone, and I doubt LLNW is going to sell enough new business to cushion the big customer loss.

Very Tough Road Ahead for Limelight Networks

Unless LLNW acquires a company soon, it’s going to be a very tough road ahead of them, this year and next. I just don’t see LLNW creating a feature with hundred million dollar revenue potential in-house. With $100M in cash on the balance sheet, LLNW needs to buy a startup with great technology, either a pure-play cloud security company, or a cloud based media company like Aframe or MediaSilo. Right now LLNW is the #3 CDN in my book, right behind EdgeCast and Akamai. Level 3 is nipping on the heels of LLNW.

And let’s not forget Fastly, as they are probably the most dangerous pure-play startup CDN competitor to LLNW. Fastly is growing very rapidly, winning big name logos, and hiring the best talent in the infrastructure industry. And yes, I heard the LLNW execs say to investors during an investor call earlier in the year, that they are mostly encountering Akamai & Level 3 in competitive situations. However, I beg to differ, and believe that Fastly is a much bigger threat to LLNW than Level 3. Never underestimate a strong pure-play CDN with fire in their belly, just look what happen to EdgeCast and Cotendo.

Do I have data points backing up my claims? No, it’s just a gut feeling of being in the industry for the last several years having worked for multiple CDNs, and seeing everything under the sun. Plus, there aren’t really many good data points out there about CDN business models, strategies, cost structures, features, and overall CDN ecosystem. On the bright side, LLNW recently hired Sajid Malhotra, as SVP of Strategy. This is a very interesting hire because Sajid spent 6 years at Convergys as SVP of M&A, and 9 years at NCR as VP of M&A and Strategy.

This tells me two things; either LLNW is looking to get acquired, or LLNW plans on acquiring a few small companies in the near term. We are all familiar with the rumors circulating over the last 5+ years about LLNW being on the sales block, but I don’t think they’ll sell. As far as an acquisition, let’s keep our fingers crossed, and hope it’s a pure-play cloud security company, or a cutting edge media cloud platform. LLNW is the most important CDN in the ecosystem. If they can increase their market cap to $1B from $200M, it’s going to do wonders for the entire startup CDN industry.