How Likely Is a Limelight IPO?
"There are no good public competitors to Akamai right now," says Kaufman Bros. LP analyst Ari Moses.
"Everybody's looking at how they can play in Internet infrastructure, whether that be data center companies or CDN companies or Web hosting companies," says Merriman Curhan Ford & Co. analyst Colby Synesael.
"Because of the fact that Limelight is so well-known as a private company by the investment community, I think for that company to go public would be very well received," Synesael says. (See Content Delivery Takes the Limelight in '06.)
Media and entertainment companies are using CDNs more and more as they need to distribute Internet content and applications at high quality and high speed. (See Limelight Goes Terabit.)
That strong demand showed in Akamai's earnings, announced Wednesday. The company reported strong revenues, and raised guidance for 2007. (See Akamai Shows No Jitter in Q4.)
Another indicator Limelight might be well received is Thursday's IPO of the interconnection and colocation services company Switch and Data (Nasdaq: SDXC). The stock priced at $17, well above the $14-$16 range set in the company's S-1, and is currently trading up more than 15 percent. Now Switch and Data isn't exactly a CDN, but its services are similar enough that analysts would see it as comparable. The company runs 34 data centers in 23 markets in North America.
Moses at Kaufman Bros. adds: "Based on current demand I think that IPO would be very successful. But it depends on the timing; if it went out today that would be the case, but will things be different six months from now when they actually do it? Who knows?"
There are rumors than Limelight's bankers would include Goldman Sachs & Co. and Piper Jaffray & Co. , but Light Reading has been unable to confirm that independently. Goldman Sachs is an obvious choice as it led Limelight's monster funding round in July 2006.
Neither Limelight nor Akamai responded to requests for comment.
The main risk in a possible Limelight IPO is the company's ongoing patent infringement spat with rival Akamai. (See Limelight Lands $130M .) Analysts say Limelight doesn't believe the Akamai suit has much merit, at least not enough to interrupt Limelight's business anytime soon.
"I understand that the law suit has to either be totally disclosed, or settled, or an IPO is much tougher for a banker to get done," says one industry source. "Akamai has a reputation for being quiet and waiting; remember that Speedera filed its S-1, then Akamai hammered them."
Akamai filed a patent infringement suit against Speedera in February 2002. The suite was settled later when Akaimi bought the smaller company. (See Content Networks Spark Legal Fireworks.)
— Mark Sullivan, Reporter, Light Reading