According to an order from the U.S. Court of Appeals for the Federal Circuit, Akamai Technologies Inc.’s (AKAM) patent litigation case against Limelight Networks Inc. (LLNW) related to content delivery is to be reconsidered, reported Bloomberg.
Akamai had accused Limelight of having infringed on a certain content delivery patent way back in 2008. The Jury ruled in favor of Akamai and awarded it $45 million. However, the ruling was overturned by a District Court next year saying that Limelight did not completely infringe on Akamai’s patents.
However, with the revival of this case, Akamai would now have another chance to protect its patents related to content delivery against its competitors.
Akamai is a leading provider of content delivery network services, accounting for approximately 30.0% of all Internet traffic through its web content delivery and acceleration platform. Akamai recently acquired Cotendo to strengthen its presence in the content delivery market. Cotendo specializes in software and services that improve the delivery of content across the Web and on mobile-device networks.
We believe that any positive result in the case could give Akamai a competitive edge over its other competitors like Level 3 Communications Inc. (LVLT), AT&T Inc. (T) and Verizon Communications Inc. (VZ) over the long term.
Although Akamai has a strong presence in the content delivery market, intense competition has forced it to lower the price of its content delivery network services, particularly the digital media services, which will hurt its margins. Moreover, increasing total bandwidth costs remain a headwind for Akamai.
However, we believe that strong demand for cloud infrastructure solutions, security and mobile products, online video along with aggressive share repurchase and strategic partnerships are positives for the stock over the long term. Thus, we maintain our Neutral recommendation on a long-term basis (6-12 months). Currently, Akamai has a Zacks #3 Rank, which implies a Hold rating on a short-term basis.
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