Don't let it get away!
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For a few brief hours, tech was back, basking in the radiance of Hewlett-Packard's (NYSE: HPQ ) better-than-expected report. But then dusk settled, and content-delivery king Akamai (Nasdaq: AKAM ) told analysts that it would be cutting 7% of its workforce.
Bears will tell you that competition is killing Akamai. They'll argue that, in a weak economy, pricing trumps service. And they'll claim that there are simply too many alternatives to what Akamai offers, as if the company and peer Limelight Networks (Nasdaq: LLNW ) can't handle an influx of new entrants -- AT&T (NYSE: T ) and Amazon.com (Nasdaq: AMZN ) , for example.
Amazon, in particular, is a cause for concern among some observers. This week, the company announced CloudFront, an Akamai-like CDN service for its cloud-computing clients. It's a very smart move. Firms that are renting processing power and storage space have a vested interest in delivering hosted code to end users quickly.
But does that make Amazon -- or, really, anyone who offers basic CDN service -- a mortal threat to Akamai, whose sturdy balance sheet features nearly $300 million in liquid assets? No. Industry watcher Dan Rayburn explains why in this recent blog post:
Today, they are going after different sized customers with very specific needs, who only need HTTP delivery. Sure, there are a lot of those kinds of customers out in the market but that is not who the major CDNs are going after. Akamai is not interested in your business unless you are doing a few grand a month. Limelight's minimum is a bit lower, but again, is not targeting a thousand-dollar-a-month customer. That's not to say that Amazon won't sign up larger customers, but that's not who the service is targeting.
Exactly. If bandwidth and hardware capacity were the only issues, if network design didn't matter, if software and services were irrelevant, then Akamai would have been dead long ago, killed by well-funded start-ups like BitGravity.
You're wrong, Mr. Market. Again. Akamai isn't going anywhere.
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