Last night, I sat down to check up on Limelight Networks (Nasdaq: LLNW). The company had just reported second-quarter results as late as possible under SEC deadline rules, and there's been some speculation that buyout talks were a factor in the late, late report date.

So I fired up my favorite financial data site, complete with real-time aftermarket quotes, and saw Limelight shares trading down by 27%. That was on top of a 15% swoon during the regular session amid the general market panic (2.0!). My first reaction was, "Holy guacamole!"

After a quick snack of homemade nachos, I came back to learn more. Here's what happened.

Never mind the complete absence of buyout news. Limelight made some bold promises for the quarter, and failed to deliver on some important ones:

Metric

Guidance (Midpoints)

Actual Result

Revenue

$52.5 million

$50.5 million

Gross Margin

39%

37%

Capital Expenses

$11 million

$11.9 million

Source: Company press release.

Among the poorer-than-expected sales, the $0.05 adjusted loss per share was smaller than the consensus estimate reached by analysts, who presumably bake all of this information into their projections.

Management pinned the disappointing sales on "a widely reported third-party security breach on a customer's platform," meaning the nearly month-long outage of the Sony (NYSE: SNE) PlayStation Network. Since that service is a prerequisite for Netflix (Nasdaq: NFLX) streaming on the popular PS3 console, that was a double whammy for Limelight, damaging revenue streams from not one but two major customers. Not exactly Limelight's fault, but shouldn't investors have been warned of this impact a little earlier? Sony was hacked in April and May -- about a quarter ago.

The company is also feeling the burn from increasingly cutthroat competition. Chief rival Akamai Technologies (Nasdaq: AKAM) has fallen on hard times, and it may be more inclined to do special-pricing deals nowadays. Up-and-coming content delivery maven Level 3 Communications (Nasdaq: LVLT) is likely using low-cost options as a way to stake out market share. All told, Limelight sees service prices declining somewhat faster than it would like.

There isn't one utterly damning metric to hang this massive drop on, but the death of a thousand cuts is just as painful. Adding it all up, you don't get much reason to have confidence in what management is promising, and that's plenty of reason for a severe haircut on an otherwise terrible market week.

Have you lost confidence in Limelight or is this the buy-in opportunity of the decade? Add Limelight to your Foolish watchlist so you can keep track of what happens next, then drop down to the comments box for some lively discussion.