Tuesday, May 28, 12:00 PM Limelight (LLNW +6.3%) "is in talks to try and sell the company to Verizon (VZ) and is desperate to make a deal," Dan Rayburn reports hearing from "multiple attendees from Wall Street" at a conference he hosted. With Limelight burning cash and facing tough competition from Akamai (AKAM) and Level 3 (LVLT), there's logic to exploring a sale. Rayburn points out Limelight's management changes and Verizon's interest in growing its CDN business could lead to a deal. However, he adds Limelight has been seeing employee defections, and has heard Limelight customers criticize the "poor performance" of its CDN. Private XO Communications is also said to be talking with Limelight.
Last week I hosted my annual Content Delivery Summit in NYC, which brought together telecom carriers, service providers, content owners, and Wall Street money managers for a detailed look at the content delivery market. Multiple attendees from Wall Street were there talking about how Limelight Networks (LLNW) is in talks to try and sell the company to Verizon (VZ) and is desperate to make a deal.
While it does not sound like any kind of agreement has been reached, such a deal would make a lot of sense for both companies as Verizon has been trying to get their VDMS business going for a few years now, without a lot of success. They are currently doing another major push right now to jump start the business and acquiring Limelight would give them customers, network resources, and the sales and product support they need. Verizon should be a lot further along with their digital media business than they are right now, and they really need to do a few acquisitions to get there. If they do, there is no reason why they can’t be a real competitor in the market, but I don’t think they can get there on their own simply by building everything in-house for their commercial CDN offering.
I haven’t heard any kind of numbers mentioned of what Limelight would be worth, but their CDN business isn’t in the greatest of shape right now. Multiple customers at the show were talking about poor performance of Limelight’s network for video, and in the last few weeks, Limelight lost more experienced sales people along with other employees. The company stated on their last earnings call that they plan to reinvest in the CDN business and add more capacity, but that it would be toward the end of the year before that is in place.