November 9, 2010
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Limelight Networks (Nasdaq: LLNW ) soared more than 35% on news that Netflix (Nasdaq: NFLX ) would award it a significant chunk of its online video delivery business.
So what: Earlier today, industry analyst Dan Rayburn reported the news in a blog post. His sources suggest that Akamai Technologies (Nasdaq: AKAM ) hadn't performed well enough delivering for Netflix and that Limelight and Level 3 Communications (Nasdaq: LVLT ) would take over as the company's principal content delivery network partners.
Now what: Akamai and Netflix have since confirmed in media reports they're in talks about renegotiating their relationship but will continue working together. More importantly, in a Reuters interview, a Netflix spokesperson denied Akamai was providing inferior performance.
So while Limelight and Level 3 probably stand to gain some business as a result of Netflix and Akamai negotiating, the $10 million to $15 million Rayburn estimates is at stake is barely more than a rounding error for Akamai, which is on track to generate more than $1 billion in 2010 revenue.
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