Oppenheimer Punches Limelight: What You Need to Know

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: Well, that didn't last long. Not even a week after shares of Limelight Networks (Nasdaq: LLNW  ) soared more than 35% on news that Netflix (Nasdaq: NFLX  ) could award it and Level 3 Communications (Nasdaq: LVLT  ) a chunk of its online video delivery business, the stock fell as much as 12% in intraday trading.

So what: An analyst at Oppenheimer downgraded both Limelight and peer Akamai Technologies (Nasdaq: AKAM  ) , reasoning that Level 3's big win changes the dynamics of the Web content delivery (CDN) market.

Now what: This is an ill-informed take based on old news. While it's certainly true that Limelight and Akamai are seeking to profit from the increased amount of video delivered over the Web -- and Netflix is the heavy -- the CDN market has been multi-vendor for a very long time.

No single content provider bets everything on one CDN, not even Netflix. And remember: Last year it was Apple (Nasdaq: AAPL  ) that gave some business to Limelight. Akamai has yet to implode.

Investors who treat the Level 3 win and Oppenheimer's downgrade as anything other than business as usual are either too panicked to be investing in this sector of the market or too unfamiliar with the competitive dynamics of the CDN business to make money.

Interested in more info on Limelight Networks? Add it to your watchlist by clicking here.

Akamai is a Motley Fool Rule Breakers recommendation. Netflix is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Akamai at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.


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