In the age of internet video and data transportation, it would make sense that the companies that facilitate these functions would do well. But, the two leading public companies in the industry have stock prices that have been hammered to the floor. Akamai (AKAM), the larger of the two, has shares that moved from under $15 two years ago to almost $60 in February. Now they change hands at $30.
Limelight (LLNW) went public about six months ago. Its shares moved over $24 and now trade at under $8.50.
There is a school of thought that these price drops are temporary and that, as there is more evidence that video streaming and downloading are still growing, both stocks will move up.
Not likely. A number of smaller companies have gotten into the content delivery business. Operations like Swarmcast are pushing down margins with aggressive prices.
Large companies are getting into the business, too. Level 3 (LVLT) plans to start a CDN using its huge network. Google (GOOG) has a de facto content delivery business of its own for delivering it own content. It could resell some of that capacity.
Akamai and Limelight are in businesses with falling prices and too much capacity. Not good news for their shares.
Douglas A. McIntyre