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Is Apple About to Cut Akamai Out?

By Erin Kennedy and Evan Niu, CFA - Feb 4, 2014 at 9:00PM

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Apple might be interesting in building out its own content delivery network, which could be a risk to its primary supplier Akamai.

Apple (AAPL 0.59%) is reportedly interesting in building its own content delivery network, or CDN. Currently, companies such as Akamai (AKAM -2.31%) and Level 3 deliver iTunes content, apps, and software updates for the Mac maker. Investors know how much Apple loves vertical integration, and the company supposedly is not pleased with iCloud performance. That could motivate it to develop some first-party network infrastructure to bolster its ability to deliver content to its user base.

Apple might not have any experience with CDN infrastructure, but it has been hiring talent in this department. Akamai got hurt last quarter after guidance implied that Apple was renegotiating its pricing. If at all, Apple likely wouldn't transition all of its CDN needs away from Akamai even if it built its own network. These types of networks take upwards of 18 months to deploy, which should give Akamai some warning if Apple were interested in cutting it out of the loop.

In this segment of Tech Teardown, Erin Kennedy discusses Apple's possible CDN ambitions with Evan Niu, CFA, our tech and telecom bureau chief.

Erin Kennedy and Evan Niu, CFA, both own shares of Apple. The Motley Fool recommends and owns shares of Apple and Google. 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.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$174.06 (0.59%) $1.03
Akamai Technologies, Inc. Stock Quote
Akamai Technologies, Inc.
AKAM
$95.81 (-2.31%) $-2.27

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