Limelight Will Appeal Ruling: Could Be Acquired Shortly

I expect Limelight Networks will appeal today’s ruling and by so doing, will get a stay on the injunction ruling until the appeal can at least be heard. So for the mean time, it will be business as usual for Limelight and they won’t be forced to shut down.

That being said, discussions are underway about Limelight being acquired by a larger player in the space who would then fight Akamai in court over the ruling. Limelight does not have a lot of resources to fight such a ruling nor an extensive patent portfolio so they are limited in what they can do.

While rumors have been circulating about Limelight being acquired by Microsoft, I am predicting it would be AT&T or Level 3. Talks are intensifying about the acquisition and I put the chance at over 50%.

Updated: Limelight has just announced they will appeal the ruling.

  • http://www.datacenterknowledge.com/archives/2008/Feb/29/akamai_wins_patent_case_with_limelight.html Data Center Knowledge

    Akamai Wins Patent Case With Limelight

    Akamai Technologies (AKAM) has prevailed in its patent infringement case with rival Limelight Networks (LLNW), which has been ordered to pay damages of $45.5 million.

  • http://www.datacenterknowledge.com/archives/2008/Feb/29/akamai_wins_patent_case_with_limelight.html Data Center Knowledge

    Akamai Wins Patent Case With Limelight

    Akamai Technologies (AKAM) has prevailed in its patent infringement case with rival Limelight Networks (LLNW), which has been ordered to pay damages of $45.5 million.

  • http://www.datacenterknowledge.com/archives/2008/Feb/29/akamai_wins_patent_case_with_limelight.html Data Center Knowledge

    Akamai Wins Patent Case With Limelight

    Akamai Technologies (AKAM) has prevailed in its patent infringement case with rival Limelight Networks (LLNW), which has been ordered to pay damages of $45.5 million.

  • Rayburn => idiot

    Dan, who the hell would buy the Limelight patent liability?? There’s too much uncertainty as to what if any licensing will be necessary to continue running the business.
    No company in their right mind would every sign up for that uncertainty without having some visibility into what it’s going to cost to continue running the service.
    As usual. .. you don’t think things through and therefore provide poor analysis.

  • Rayburn => idiot

    Dan, who the hell would buy the Limelight patent liability?? There’s too much uncertainty as to what if any licensing will be necessary to continue running the business.
    No company in their right mind would every sign up for that uncertainty without having some visibility into what it’s going to cost to continue running the service.
    As usual. .. you don’t think things through and therefore provide poor analysis.

  • God is in the details

    Rayburn said: “Limelight does not have a lot of resources to fight such a ruling nor an extensive patent portfolio so they are limited in what they can do.”
    They have $225MM in cash and cash equivalents, with no near term liabilities. $200MM in the coffers should be more than enough to appeal and fight a patent issue.

  • http://profile.typekey.com/grinsandfun/ grinsandfun

    I heard thru the rumor mill that CDNetworks could be looking at the option – from the outside – it could be a good fit. They are the largest CDN in Asia & just now pushing into the US & Europe markets. They also have patents on their technology – so, no worry about getting the AKAM boot in the rear :).

  • http://www.BusinessOfVideo.com Dan Rayburn

    Having a bunch of cash in the bank does not give you the resources to fight a patent battle. You need a lot more than just cash. A fight like this requires a lot of patent attorneys and a lot of resources. A small company like Limelight can’t afford to do that as it would take away too much of their time and focus from running their business. This is not about dollars.

  • http://www.BusinessOfVideo.com Dan Rayburn

    Many companies have an extensive patent portfolio full of hundreds and in some cases thousands of patents. Many of these same companies also have CDN patents of their own and may feel that Akamai is infringing on their patents. If they can acquire Limelight cheap, acquire over 1,100 customers and $100 million in revenue – and have the resources and to fight the 703 patent, it’s not “poor analysis” at all.
    I stand behind my words with my name, where is yours? Your opposed to the idea so much, yet won’t put your name behind it.

  • amateur hour

    Rayburn says: “A fight like this requires a lot of patent attorneys and a lot of resources.”
    Good patent attorneys take money. Limelight has it. What other resources are you talking about??
    Many small successful businesses have won patent lawsuits without killing their business. And Limelight is anything but a small business (over $100M in revenues. . . come on).
    Any new lawsuit by a “white knight” would take years to prosecute. Meantime infringement would still be taking place and the white knight would be on the hook for those damages and any licensing issues that could make Limelight’s $100M in revenue go to zero which means it will be a very expensive license, all the more so with a big partner. It will never happen for these reasons and 20 others. You’re just like all the hypsters saying Yahoo will get bought by somebody else. . . sensational headlines, but unfounded and credibility-busting. . .

  • Off the record

    Rayburn says: “I stand behind my words with my name, where is yours? Your opposed to the idea so much, yet won’t put your name behind it.”
    you’re asking him to be on the record . . . you mean unlike most of your unnamed, unreferenced sources for your misinformed articles???

  • http://www.BusinessOfVideo.com Dan Rayburn

    You are missing the point completely. If someone buys Limelight, like a Level 3, why would they need to continue to operate the Limelight network? They wouldn’t. They would transition customers to their CDN and shut down the Limelight network over time.
    They are not going to operate two different networks. This is what Akamai did when it bought InterVU, Speedera and Nine System and when Cable & Wireless bought Sandpiper and Digital Island etc….
    If they are not operating the Limelight network after they acquire it, and can show proof of that, then the 703 patent is no longer valid unless Akamai goes after the new company.
    Yes, you are right, I don’t name my sources, as no reporter does, but I stand behind my words and the info I publish. In the 12 months my blog has been around, I have not published anything that has not been backed up with details or with real data from actual customers.

  • RD

    Level(3) is currently crippled from trying to digest the spree of acquisitions they went on over the last few years. Unfortunately, merging all of the acquired networks, people, and OSS systems has been something that they’ve struggled with, and continues to plague them today. The problem is severe, and when you take the amount of debt that they have into consideration, things aren’t exactly pretty over there in Omaha.
    From what I hear, their CDN unit is somewhat unencumbered from ‘corporate’ and can move fast, and has gotten a lot of traction. Other than pissing off other CDNs who are customers (such as Akamai and Limelight, both of which spend considerable amounts with Level(3)), it makes a lot of sense for a debt-heavy Level(3) to offer and grow the product. It could be a major driver for fixing up their own financial picture while leveraging their considerable assets in all the right ways, and they know this.
    When they bought the Savvis/CW CDN, they weren’t really buying technology or revenue (they essentially rebuilt the whole thing). They were buying a large patent portfolio that goes back to the mid 90s, that they were prepared to defend. As a multi-billion dollar, public company, they would have definitely spent considerable time examining and quantifying their legal exposure with these patents before moving forward.
    I’m sure that Akamai entered into those conversations many, many times, given the history of the industry.
    It *will* be a major distraction to LLNW to fight this. It’s not just dollars. LLNW needs to focus now more than ever on executing their plan, pushing the edge with their products, and growing their revenue. This will be a huge distraction for them from a people bandwidth perspective. If overall productivity at LLNW is cut in half over the next year, and the onslaught on their stock continues, it’s a big problem. That’s part of the plan, and AKAM is familiar with the game.
    If AKAM succeeds with its goal in this lawsuit (they want to end up effectively ‘owning’ LLNW: eliminate a major competitor, and perhaps get a revenue/talent bump.), then Level(3) would be a potential follow-up target. Whether the considerable patents that LVLT now has will act as a sufficient deterrent to keep AKAM off their backs remains to be seen. That’s a legal question and is what people should be talking about rather than making offensive posts.
    As Dan has pointed out, since LLNW is so cheap now, it would be of particular interest to someone who is looking for market share/traction AND can fight the patent battle. LVLT is an obvious choice, but my initial comments were meant to underscore the reluctance that shareholders may have for further acquisitions. A lot of things would have to happen and come together, but it does make sense. How bad does Level(3) want to stake its claim and grow its CDN business? Do they have the necessary combination of legal and technology assets to service the LLNW revenue? They’d have to act quick, and it wouldn’t be easy.
    But, if all the stars do align, it just may be a cheap way for Level(3) to become one of the most (if not the most) formidable players in the market, on the cheap.

  • CDN_Watcher

    There’s no chance of the acquisition happening.
    The LVLT/Savvis patent portfolio went head to head against Akamai’s in the 2001/2002 timeframe. And from what I remember, LOST BIG TIME, to the tune of dollars ruled in Akamai’s favor. And wouldn’t you think that if there was any chance the patent portfolio had any more legs, LVLT would have exercised that already?? And do you really think that AKAM would drop their suit or quickly settle b/c of a threat of patents that they’ve already won against and would be years out from any real court action anyways?? Not a chance.
    Also, LVLT doesn’t have an adequate CDN to convert Limelight customers. If they did, LVLT would actually have big business on the CDN by now, which they do not. Furthermore, Limelight’s customers chose Limelight’s technology and services, not LVLT’s. Those customers are long gone if they’re somehow transitioned over to a third-rate CDN with no substantial traction in the marketplace. There would be a mass Exodus (no pun intended) of LLNW customers which even if LLNW is not acquired, will likely happen anyways.
    My $0.02

  • CDN_Watcher

    Also, why is it okay for your sources to stay anonymous but not a poster to your blog?

  • http://www.BusinessOfVideo.com Steve Rubel

    If Dan didn’t want anonymous comments on the blog, then he would turn the comments function off. I think the point he was making earlier is valid. Some of the comments are very adamant about their point of view and want to insist how anyone who thinks different than them are wrong, yet then they don’t even put their name.
    Comparing an anonymous comment to a blog post, versus a blogger posting under their own name, but not revealing their sources, is not the same thing.
    Frankly I don’t know why some people are so concerned with who someone’s sources are or not. All that matters is their track record, which in Dan’s case, is nearly perfect in terms of the deals and news he publishes, before it is announced. Is he right on Limelight being acquired, don’t know, but I guess we’ll all find out over time.

  • http://www.BusinessOfVideo.com Steve Rubel

    On the comment of:
    “The LVLT/Savvis patent portfolio went head to head against Akamai’s in the 2001/2002 timeframe. And from what I remember, LOST BIG TIME, to the tune of dollars ruled in Akamai’s favor. ”
    Digital Island was sued by Akamai. Then DI was acquired by Cable & Wireless. C&W then went bankrupt in the U.S. and made a one time payment to Akamai, amount unknown. So we have no idea if they “lost big time” in terms of dollars.
    And even with the ruling two years after the suit started, C&W said “The injunction is a legal technicality about a legacy part of the CDN that was abandoned some time ago”. So the idea that someone buys Limelight and does away with Limelight’s technology and then is no longer infringing is possible.

  • http://profile.typekey.com/grinsandfun/ grinsandfun

    PLUS – LLNW lost a considerable portion of their revenue – Stage6 was aprox 8% & that is gone – this is probably why the distress signal came out before thought went into the info that Dan apparently heard from the inside of the “Light”. Big picture – LLNW would more than likely not had been a good investment for 2008. Internap is coming strong (hired an additional 30 reps across the US), CDNetworks (Staffing out the US), Panther, L3 & so many others out there are really making this interesting.

  • RD

    “Also, LVLT doesn’t have an adequate CDN to convert Limelight customers.”
    From a capacity perspective, (assuming that the requisite software technology is in place, and can scale), it’s all about two things: 1) raw edge network capacity and 2) server farm/#-of-pops capacity. Neither of these elements relate in any way to software/arch IP (which is what the suits are about).
    I’m not saying it won’t be difficult, and I would personally bet AGAINST an acquisition (but for other reasons than these two)
    On the network side, they could keep all LLNW’s routers, 10G transit and peering ports in use, and slowly convert the traffic to their own network over the course of a few months or a year. As a Tier-1 network, they’d gain additional margin out of the LLNW revenue (since that traffic would be completely ‘settlement free’). They could fold the LLNW backbone (currently on lease from Global Crossing I believe, a LVLT competitor) onto their own.
    From the server farm perspective, Level(3) has plenty of idle co-lo capacity in second tier markets and buildings. In addition, there’s nothing about the physical infrastructure of LLNW’s (or any other CDN) that has ever been called into question in these lawsuits. A server farm is a server farm. LLNW uses commodity x64 machines (and I’d presume that LVLT does too).
    Using the LLNW network or server farms as necessary over the short term would make sense, but it is against the longer term interests of Level(3). They’d want to assimilate it into its own network/colo assets.
    Now someone like Korea’s CDNetworks on the other hand, it would be a major major asset on the table! LLNW has built out one of the most diverse peering networks, and doing so takes a lot of money (and a lot of time!). To a company like that, the network and server farm buildout of LLNW would be extremely valuable.
    So while I do so a lot of reasons that this wouldn’t happen (most obvious to me in dealing with Level(3) extensively is how crippled they are as a company right now), I don’t think ‘adequate CDN’ is one of them.
    “The LVLT/Savvis patent portfolio went head to head against Akamai’s in the 2001/2002 timeframe. And from what I remember, LOST BIG TIME”
    I don’t think they lost big time. I’d like to further research what exactly happened there, but I remember thinking at the time that it was far from open and shut.
    Some of the details that Steve pointed out seem to indicate that perhaps there is some degree of indemnification / way forward there.
    Would be interested to find out more.

  • RD

    All in all though, I hope that LLNW wins the appeal. And can continue operating.
    Or, if it comes to it, manages to replace specific parts of its technology without impact to its business.
    The environment with these software patents, for lack of a better word, SUCKS.

  • Mr Big

    Rayburn says “If someone buys Limelight, like a Level 3, why would they need to continue to operate the Limelight network? They wouldn’t. They would transition customers to their CDN and shut down the Limelight network over time.”
    This is absolutely laughable, and demonstrates your lack of understanding of CDN architecture. One of the commentors made note of the fact that when Level 3 bought the CDN assets from SAVVIS, they bought a ten year old infrastructure with 1990’s technology and no capacity. Do you have any idea what it would take to rebuild Limelight’s network? Do you have a clue as to what their capacity is?