Akamai Technologies Inc. ( AKAM )
has acquired FactSoft Inc., a California-based web content
acceleration software provider. Akamai made the acquisition in a
bid to strengthen its cloud infrastructure solutions. The financial
details of the deal were not disclosed.
FactSoft's products, such as FastSoft E Series Internet
Accelerators and FastSoft E Series EX, help in faster downloading
of web content. The company's solutions also help in the
acceleration of desktop virtualization.
The acquisition of FactSoft is expected to enhance Akamai's
efficiency in delivering digital content. Moreover, Akamai can
leverage FactSoft's advanced Transmission Control Protocol ("TCP")
technology for further enhancement of its mobile applications and
Along the same lines, Akamai acquired Cotendo late last year.
Cotendo specializes in software and services that improve the
delivery of content across the Web and on mobile-device
We believe that these acquisitions will positively impact
Akamai's cloud optimization solutions. Cloud infrastructure
solutions contributed approximately 58% of the total revenue in the
second quarter of 2012.
According to Gartner, the cloud services market is expected to
grow over 3 times by 2015 to $177.0 billion. According to market
research firm IDC, spending on public cloud services is expected to
increase four times faster than the entire IT market over the next
four years, reaching $72.9 billion by 2015. This tremendous growth
potential will benefit Akamai, especially in the enterprise segment
with the rapid adoption of cloud technologies.
We believe that these acquisitions, along with the cloud
initiatives and new products, will help Akamai to achieve its
long-term annual revenue target of $5.0 billion. We also believe
that the acquisitions will provide a significant competitive edge
to Akamai compared to other established content delivery network
providers ("CDN") such as Limelight Networks Inc.
( LLNW ), and Level 3 Communications
Inc. ( LVLT ), as well as new entrants CDNetworks,
AT&T Inc. ( T ) and
Verizon Communications Inc. ( VZ ).
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.
We maintain our Neutral recommendation on Akamai over the long
term (6-12 months). Currently, Akamai has a Zacks #3 Rank, which
implies a Hold rating on a short-term basis.
AKAMAI TECH (AKAM): Free Stock Analysis Report
LIMELIGHT NETWK (LLNW): Free Stock Analysis
LEVEL 3 COMM (LVLT): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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