Apple Takes the Limelight

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Did Akamai (Nasdaq: AKAM  ) just lose some business? It's possible. Dan Rayburn, a close watcher of the Web's content delivery networks (CDN), is reporting that Apple (Nasdaq: AAPL  ) has begun shipping content via Limelight Networks' (Nasdaq: LLNW  ) CDN.

"Starting in the fourth quarter of 08, content that I historically saw being delivered from Akamai, also started coming from Limelight Networks," Rayburn wrote in this blog post. Last week, he says, Limelight delivered a QuickTime update to users on behalf of Apple.

Akamai investors have a right to be nervous. Apple was an early backer of the company and, at one time, the exclusive supplier of content for QuickTime TV. Of Akamai's longest-standing business partners, only Microsoft (Nasdaq: MSFT  ) ranks near Apple in terms of tenure.

But this isn't a break-up. Rather, it's a sign that the CDN market is changing. Deutsche Telekom (NYSE: DT  ) this week partnered with upstart EdgeCast, mirroring an earlier arrangement between BitGravity and Tata Communications. AT&T (NYSE: T  ) and (Nasdaq: AMZN  ) are also offering CDN services.

So the market has become more competitive. The question before investors is whether Apple's deal with Limelight reflects a degrading of Akamai's advantage or a bigger appetite for data delivery. My guess is that it's a little of both.

We've known for a while that rivals were undercutting Akamai on price. But we also know that Web traffic is growing fantastically. set a record with more than 21 million Internet video streams the day of President Obama's inauguration, better than three times its prior peak. Akamai supported roughly 7 million streams that day.

The implication? Apple, recognizing that Akamai could be nearing capacity, has hired Limelight to be a backstop. Don't look so surprised; the iEmpire has 17 million iPhones out there pushing and pulling data to and from the Web. Ma Bell delivers some of the content, sure, but when you're downloading from iTunes -- as so many did on Christmas Day -- you're using Akamai, not Limelight. Yet.

Akamai reports fourth-quarter earnings next Wednesday, Fools. I'd tune in.

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Fool contributor Tim Beyers had stock and options positions in Apple and a stock position in Akamai at the time of publication.

Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is hungry for some breakfast. Want anything?

Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 29, 2009, at 1:39 PM, 5574tjh wrote:

    Tim,I take exception with Dan Rayburn's article-his conclusions do not fit his findings.What he concluded and bannered on his headlines were that Apple is now going to a 2nd CDNWhat he found:1.that Apple used almost totally Akamai for it's CD until the Holiday season.2.during the Holiday season an occasional ping indicated Limelight may be involved.3.since January 1st,2009 he has found no evidence based on his "reseach" that Apple is any longer using (if they ever did) Limelight.Apple,Limelight and Akamai will not comment-when has Limelight missed a PR opportunity?The sad fact is that based on his poor research and marginal information this has been carried a TRUE financial news.

  • Report this Comment On January 29, 2009, at 2:50 PM, DanRayburn wrote:

    You didn't read my post carefully. I said on Friday January 23rd, the day Apple released an update to QuickTime, the download came from the Limelight Network out of a Seattle POP. I even gave the URL info from the trace.

    You can be in denial and you can disagree all you like, but trace route info does not lie.

  • Report this Comment On January 29, 2009, at 4:44 PM, 5574tjh wrote:

    Did you not say that sorting thru tons of data only Akamai's domain is the only one showing up since.

    Out of all the research you did, how often did Limelight show up-1%,10%,40% of the time.

    Does Limelight have a data visualization site like Akamai?

  • Report this Comment On January 29, 2009, at 9:49 PM, DanRayburn wrote:

    No, that is not what my post says. As far as I know, Limelight does not have any public data visualization site.

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