February 16, 2012
When Limelight Networks (Nasdaq: LLNW ) pummeled analyst targets this week, investors saw it coming a mile away. You could say that chief rival Akamai Technologies (Nasdaq: AKAM ) set the stage with its own terrific fourth-quarter report, since both stocks have gained about 18% in the last two weeks. But that would be far too simplistic. In fact, Limelight's shares started rising before Akamai grabbed the soapbox.
With a non-GAAP net loss of $0.01 per share on $46 million in revenue, Limelight nudged past Wall Street's estimates. That's a modest 6.8% year-over-year gain in sales from continuing operations; Limelight sold its EyeWonder operation to DG FastChannel (Nasdaq: DGIT ) in September. For Limelight, the ad business was a money-losing distraction at best. For DG, that purchase plugs into a growth-by-acquisition strategy. Different strokes for different folks.
So Limelight is refocusing on its core operations, including a 55% year-over-year boost to its enterprise cloud storage operations and blistering 160% growth in its video delivery platform. The Netflix (Nasdaq: NFLX ) account plays a large part in that video-based success, and CEO Jeff Lunsford is happy to discuss it without naming names: "This [content delivery network] business is unique and valuable, having funded and fueled the construction of a globally distributed platform that solves what we believe is one of the hardest problems in cloud computing -- that of delivering broadcast quality video to hyper-connected viewers across 800+ device types across the globe."
Limelight doesn't get that juicy morsel all to itself, sharing the Netflix account with Akamai since time immemorial and with Level 3 Communications (Nasdaq: LVLT ) since the end of 2010. But Limelight is smaller than either of its video co-hosts, and feels the effects of this big deal so much more keenly. Limelight is going all-in on its cloud-computing bet, and it's not a bad idea.