RealTime IT News

Akamai Serves Up Netli

Web acceleration giant Akamai , based in Cambridge, Mass, looked to Silicon Valley for its latest acquisition, Mountain View, Calif. based Netli. The transaction, subject to the normal regulatory approvals, is worth about $177 million, or 3.2 million shares of Akamai common stock at today's closing price of $55.

The acquisition of Netli is expected to enhance Akamai's application acceleration business, which improves the performance and throughput of Web and other Internet-based applications.

Akamai trumpeted the deal as combining Netli's high performance communications protocol with its own global scale and unique capabilities to route Internet traffic around points of congestion.

Enterprise customers stand to benefit from the improved performance of dynamic, highly-interactive applications such as customer portals, collaboration platforms, e-learning environments, and business-to-business commerce.

Akamai not only gained great technology, it eliminated a competitor that was winning away some of its business, according to Gartner research director Lydia Leong.

"Netli was winning application acceleration deals and they had technology Akamai didn't have," Leong told internetnews.com. "Their product portfolios are pretty complimentary and this also helps Netli, which needed a dance partner to really grow."

Leong is bullish on the deal, but thinks pricing is likely to go up as competition decreases. "This deal is a positive for the direction of the company, but not sure it's great for the market because it reduces choice. Competition and innovation comes when you have multiple players. "

Leong also noted that Akamai raised prices "by a huge multiple" following its acquisition of Speedera, and expects Netli customers will get an increase.

Akamai officials wouldn't comment on specific product plans. "We're excited about the combination of two great managed service providers in the application acceleration space," Rich Kennelly, vice president of product management at Akamai, told internetnews.com.

Analyst Peter Christy of the Internet Research Group noted that Netli was winning deals in part because the lower cost alternative Speedera provided had gone. "In some areas, Netli was keeping Akamai honest as a price competitor, so that may be going away," Christy told internetnews.com. "But if Akamai can't save customers real money, it won't sell anything. This deal's a win-win."

He noted that Netli doesn't have the resources, like the over 15,000 network servers worldwide, that Akamai has, to deliver, for example, the millions of videos YouTube viewers are able to call up in a snap.

Akamai officials said there are no plans to move Netli's offices in Cambridge which will become a division of Akamai. Netli has between 70 to 80 employees.

Christy said he expects competition in the Web acceleration space to grow as new models, such as Software-as-a-Service , emerge. "You have SaaS and spam filtering moving back into the network," said Christy.

"There are a lot of interesting structural changes we can anticipate. I'm sure we'll see newer ideas and startups like Netli focus on specific areas, gain leadership and perhaps be purchased. Companies like Cisco  and Akamai are happy to let others take the development risk and pay a fair price if it's something they need."