Who Will Buy Akamai?

Akamai (Nasdaq: AKAM  ) has made a cozy living out of serving up Web pages and media files reliably and quickly. Is it time to serve itself?

Bloomberg is reporting that Akamai is an attractive buyout candidate at its current price, leaning on analysts at Blaylock Robert Van LLC and SunTrust Robinson Humphrey that see IBM (NYSE: IBM  ) and Verizon (NYSE: VZ  ) as the leading potential acquirers.

Before we go and marry Akamai off, let's pop in for a reality check.

Akamai may have hit a fresh 52-week low earlier this week, but so have hundreds of other companies. Most former tech darlings are trading at steep discounts to the highs they hit earlier this year. In other words, Akamai isn't the only tech stock trading at a price that seemed unfathomable a few months ago.

We also have to candidly approach Akamai's fundamentals. Running a content-delivery network isn't as lucrative as it used to be. Price wars have eaten away at the margins, as Akamai has to compete with the cutthroat pricing that's being offered up by Level 3 Communications (Nasdaq: LVLT  ) , Limelight Networks (Nasdaq: LLNW  ) , and even hungrier, smaller rivals.

This is shaping up to be the third consecutive year where revenue growth outpaces Akamai's bottom-line spurts.

Akamai's stock has been inching lower in recent months, but so have its fundamentals. Three months ago, analysts figured that Akamai would earn $1.57 a share this year and $1.79 a share come 2012. Now those same pros see Akamai generating net income of $1.45 a share this year, nearly flat with last year's showing. Next year's profit target is now down to $1.62 a share.

This doesn't mean that Akamai won't get bought out. Running a proven server farm isn't as scintillating as it used to be, but this is still the top dog in a niche that will continue to grow in demand as companies serve up more website pages and chunkier media files. However, the argument that Akamai is buyout bait because it has hit a new low is an incomplete thesis. Prices change, but so do fundamentals.  

If you want to see how the content-delivery networks hold up in the coming days, consider adding Level 3 Communications, Limelight Networks, and Akamai Technologies to My Watchlist.