Will Akamai Endure?

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Competitors are stepping up efforts to take another bite out of Akamai Technologies (Nasdaq: AKAM  ) . Just this week:

  • This week, Level 3 (Nasdaq: LVLT  ) announced plans to acquire Global Crossing (Nasdaq: GLBC  ) for $3 billion in cash and assumed debt.
  • EdgeCast, which industry analyst Dan Rayburn reports already powers AT&T's (NYSE: T  ) content delivery network, has unveiled its application delivery network for e-commerce and cloud computing. Gawker Media talked up the service in a press release.

For its part, EdgeCast said sites realized 40% to 250% performance gains during a three-month beta testing period that covered 10 companies. There's no mention of what CDN or related services the participants had been using prior to EdgeCast, but the subtext is clear: EdgeCast is aiming for Akamai and, to a lesser degree, Limelight Networks (Nasdaq: LLNW  ) .

Akamai has more to worry about because EdgeCast, with application and dynamic content delivery, and Level 3, with a fast, global backbone network, are positioning themselves to handle difficult (i.e., high-margin) data transport jobs.

Should investors worry? Will these rising networks force price cuts in the highest margin side of Akamai's business? Or is this mere saber rattling disguised as a serious threat? You tell us. Please vote in the poll below and then leave a comment to tell us whether you'd buy, hold, or short shares of Akamai at present levels.

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

Fool contributor Tim Beyers is a member of the 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 everlasting.


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