Please ensure Javascript is enabled for purposes of website accessibility

Akamai: First Sue, Then Buy

By Dan Radovsky – Updated Apr 6, 2017 at 5:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Akamai likes to rough up its acquisition targets before it buys them.

Tiny Israeli start-up Cotendo -- $39 million raised from venture capitalists so far -- has been a thorn in the side of much larger Akamai (Nasdaq: AKAM) and its $5 billion market cap since it entered the content-delivery network market in 2008. By charging customers half of what Akamai charged, Cotendo kept whittling away at the larger company's market share, causing the industry's 900-pound gorilla to try to squash the pest.

Akamai then did what it has done successfully in the past: Once a company becomes competitive, Akamai sues it for patent infringement. In the early 2000s, Akamai went after content-delivery companies Digital Island and Speedera Networks. After wearing Speedera down, Akamai bought it.

Last year, Akamai sued Cotendo, and now -- according to reports originating over the weekend in Israel's Globes -- Akamai is competing with Juniper Networks (Nasdaq: JPNR) and AT&T (NYSE: T) to buy it. Juniper has previously contributed in a round of private financing for the company, and AT&T has signed a four-year, $30 million distribution deal with Cotendo.

But now, another Israeli news site, Calcalist, says that Cotendo and Akamai are working on a deal worth more than $300 million.

Heavy lies the head that wears the crown
In the competitive world of content-delivery services, speed is king, and what Cotendo has that so interests its suitors are products that can speed up websites and the delivery of streaming video. But there is another aspect of this possible acquisition that bears considering: turf.

Even though Akamai is the largest content-delivery provider in the world, it is sensing a consolidation that could threaten its position as industry behemoth. Limelight Networks (Nasdaq: LLNW) and Level 3 (Nasdaq: LVLT) have been rumored for months to be merging, and if AT&T uses its deal with Cotendo to get deep into the CDN business, Akamai's crown could start feeling a bit heavier.

As yet, no deal has been officially announced, but you can keep track of what's happening with Akamai and the other companies mentioned here by putting them on your personalized version of the Fool's My Watchlist service:

Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
$15.90 (3.65%) $0.56
Akamai Technologies, Inc. Stock Quote
Akamai Technologies, Inc.
$83.84 (4.38%) $3.52
Edgio, Inc. Stock Quote
Edgio, Inc.
$2.86 (2.88%) $0.08

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.