Another Competitor Consumed

As expected, Akamai (NAS: AKAM) finally pulled a painful thorn from its side by buying Israeli start-up Cotendo. Though tiny in comparison to its buyer, Cotendo has been one of Akamai's largest competitors in the content delivery network and website acceleration services business.

Rumors have been swirling about such an acquisition since last month. Akamai ended up paying $268 million in cash. This is far less than the $350 million that was reported in November by the Israeli press, but considerably more than the initial $36 million Cotendo had raised from private investors since the company's 2008 founding.

And more recently, the company acquired another $17 million from those investors and new partners Citrix Systems (NAS: CTXS) and Juniper Networks (NYS: JNPR) . Another partner, AT&T (NYS: T) , signed a four-year $30 million distribution deal with Cotendo. Israel's Globes had written then that Juniper and AT&T were also pursuing Cotendo.

Akamai is still the world's largest content delivery provider, but to stay that way it needs to keep companies like AT&T from getting deeper into the content delivery business. It also sees a threat from potential CDN industry consolidations, such as the rumored merging of Limelight Networks (NAS: LLNW) and the increasingly aggressive Level 3 (NAS: LVLT) .

True to form, before Akamai made its bid, it sued. Almost 10 years ago, Akamai attacked CDN companies Digital Island and Speedera Networks for patent infringement. Finally worn down, Speedera sold out to Akamai. In its latest suit, Akamai was even joined by the Massachusetts Institute of Technology in its patent litigation against Cotendo.

Akamai has been followed closely by fellow Fool Tim Beyers of the Motley Fool Rule Breakers team. His insights into the company's challenges are worth reading, as is his re-assessment of his long investment in the company.

Investing in Internet-related companies requires keeping up with the latest technological developments. Inevitably, some of those have the potential to cause game-changing shifts in the way we all go about our lives. Recognizing these developments -- and seeing the potential in them before the rest of the world does -- is the holy grail of investing. Here is a Motley Fool special video report that every tech investor should watch: The Two Words Bill Gates Doesn't Want You to Hear... Don't fall behind; watch this free report now.

At the time this article was published Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Managing your Portfolio

Keeping your portfolio and financial life fit!

View Course »

Income Investing

Grow your nest-egg.

View Course »

Add a Comment

*0 / 3000 Character Maximum