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Akamai to Acquire Competitor Cotendo for $268 Million

TMCnews


TMCnews Featured Article


December 22, 2011

Akamai to Acquire Competitor Cotendo for $268 Million

By Susan J. Campbell, TMCnet Contributing Editor


Akamai (News - Alert) Technologies is expanding. The Web content delivery company has announced plans to acquire Cotendo, its Sunnyvale, Calif.-based rival. The deal is set at $268 million cash.



This move is part of Akamai’s commitment to increase the pace of innovation in mobile optimization and cloud initiatives. Paul Sagan, president and CEO told the Boston Herald the company is excited about joining forces with Cotendo as they seek to accelerate growth across dynamic landscapes of cloud and mobile optimization. 

According to Sagan, the technology, partnerships and people Cotendo brings to the table are a strong complement to Akamai. When the two companies join, there is significant opportunity for their combined technologies as enterprises continue to move toward cloud migration and seek solutions to support the trend toward mobility. 

Cotendo was founded in 2008 and operates a technology center in Israel. Under the terms of the agreement, Akamai, based in Cambridge, will acquire all of Cotendo’s outstanding equity. Once expected purchase price adjustments occur, as well as the assumption of outstanding unvested options to purchase Cotendo common stock, the transaction closing is set to occur within the first half of next year.



Relations between the two competitors were not always business as usual. Last year, Akamai sued Cotendo for patent infringement. In 2005, Akamai also sued Speedera for the same reason, later purchasing the company. The trend appears to bode well for Akamai as it continues its drive toward market leadership.

Cotendo co-founder and CEO Ronni Zehavi shared in a statement with this merger with Akamai, Cotendo customers and partners will “gain access to a comprehensive, global platform and wider portfolio of leading-edge services supported by some of the most experienced providers in the industry.”

Reuters (News - Alert) reported that with this announcement, shares of Akamai rose 20 percent to $31.93 on Thursday on Nasdaq, with trading settling at $31.38 in the afternoon. More than 17 million shares were exchanged by 13:31 ET, roughly five times the normal volume for this stock.

Brokerage Collins Stewart shared that prior to this acquisition agreement, Cotendo had a strategy of offering a 30 percent discount – or more – for its services. With this new deal, Akamai is expected to be modestly diluted. Morningstar's Summer, however, expects it will be accretive in the long term.

As for Cotendo customer reactions, Akamai will have to focus intently on keeping customers happy with the impending changes.



Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.

Edited by Juliana Kenny






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