While many seem to think I am crazy for thinking anyone would acquire Limelight, it would make sense for a company like Level 3. Yes, we all know Level 3 has had some problems with the integration of all the acquisitions it has made as of late. But putting that one hurdle aside, there are many reasons why this would make sense in particular for Level 3.
For starters, everyone seems to think that anyone acquiring Limelight would continue to operate their network. But for someone like Level 3 they don’t need the Limelight network in operation. They need their sales reps, their customers, their revenue and their hardware. Transition as many customers as possible over to the Level 3 network and shut down the Limelight network. When Akamai acquired Speedera and Nine Systems they didn’t keep those networks functioning. They took the customers and terminated the networks. Same thing happened when Internap bought VitalStream.
I don’t think anyone would argue that you could do all of that overnight. It does take time and requires a great deal of work, but it’s not difficult considering the product Limelight is selling to customers is very straight forward without a lot of customization. And any company that acquires Limelight would probably lose 20-25% of the customer base anyway so you’d be talking about having to migrate roughly 750 customers. That’s not rocket science.
Would a company that buys Limelight have to pay some sort of royalty to Akamai while they transition the customers over and shut down the Limelight network? Maybe. But they might also use the appeal process to do all of that by the time the appeal goes to court and then show that they have terminated the product that was in question. If that were to happen, I would expect Akamai would then file suit against Level 3 for the same 703 patent, which in my eyes they have not done to date as Level 3 has not been a serious threat to Akamai yet.
Some also say that Level 3 could not do this as they are not a real player in the CDN space and don’t have the network to transition the customers to. That’s incorrect. They have more customers for CDN than most realize, are continuing to add capacity each quarter and will become the number three CDN this year based on CDN revenue in the U.S. They are very quickly becoming a real option in the space and with the integration of the Vyvx products and the applications they acquired when they bought Servecast, they are laying the ground work for a true ecosystem offering of more than just shipping bits.
Most would say that by Level 3 buying Limelight it would make them a target for a suit by Akamai. But they are missing the bigger picture. Level 3 is already lining itself us for a patent suit by Akamai. Based on the broad interpretation of the 703 patent, every CDN is already in violation. So why hasn’t Akamai gone after Level 3 or any of the others? Simple. Even for Akamai a lawsuit is a lot of work and costs money. They are not going to go after any CDN until the CDN is a real threat to them in the market and doing enough revenue to make it worth their time. Cable and Wireless was around for years before Akamai went after them. Speedera was too. It wasn’t until Speedera was getting traction in the market and revenue before the suit was filed.
And look at Limelight. Limelight was founded in 2001, yet Akamai didn’t file the suit until five years later, when they were doing some real revenue and had become a real competitor to Akamai. Level 3 acquiring Limelight does not make them more of a target as they are already in the cross hairs and Level 3 knows it.
When Level 3 bought the SAVVIS/Cable & Wireless CDN assets they were buying a large patent portfolio to go along with the 800+ other patents in their portfolio. Clearly Level 3 knew what they were buying, knew the outcome of the Cable & Wireless and Akamai lawsuit and they would have spent a lot of time examining what their legal exposure may be with the patents before the acquisition. Based on Level 3 buying going through with buying the assets, they clearly feel they are prepared to defend whatever comes their way.
Is it an easy deal for Level 3? No. But it’s not a crazy one and with the right pieces in place, Level 3 becomes the number two CDN overnight in terms of revenue and customers. And for all the people who still want to say how successful Akamai was in the Cable & Wireless suit, remember that Akamai sued Digital Island who was then bought by Cable & Wireless even though Digital Island was being sued. And we don’t know how "successful" Akamai was in that suit as Cable & Wireless went bankrupt in the U.S. before any of the rulings were appealed. The one time cash payment by Cable & Wireless to Akamai was made in the final days of them closing down operations in the U.S. and was a small enough amount that Akamai didn’t even need to mention it in any of their filings. (At least not that I could find)
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 like Level 3 could take what they need and shut down the Limelight network is completely possible.
The biggest hurdle I see to this is the debt that Level 3 has and the problems they have had with all the integrations in the past. Those could potentially be deal breakers that keep this from happening. But if all the right pieces fall into place, Level 3 could make out nicely acquiring Limelight and propelling itself to the number two spot in the market.