Akamai Grabs Netli in Applications Bid

| Feb. 7, 2007 | Internet/Managed Services - U.S. | Competitive Intelligence Report

| Analyst: Counse Broders

Current Perspective: Positive
Vendor Importance: High
Market Impact: Very High

Event Summary

On February 5th Akamai Technologies announced that it would acquire Netli in a move that will support Akamai’s application acceleration solutions for Web and other Internet-based applications. Akamai will acquire all of the outstanding equity of Netli in exchange for approximately 3.2 million shares of Akamai common stock, currently valued at approximately $177.8 million.

Analytical Summary

• Current Perspective: Positive on Akamai’s acquisition of Netli as the merger will significantly boost Akamai’s ability to speed Web and Internet-based applications. Akamai makes a critical move with this deal, building on its last acquisition of Nine Systems in November 2006.

• Vendor Importance: High to Akamai, as the company faced a challenge to its market leadership in the new segment of application acceleration, and Netli’s partnerships with carriers such as with Verizon Business, threatened to undermine its success in this arena.

• Market Impact: Very high on the CDN market, as this merger significantly boosts Akamai’s position in the market by adding a key set of services for application acceleration, and eliminating a key competitor. Remaining competitors, already challenged to beat Akamai, face a growing giant in the space and will need to take steps to ensure viability and future survivability.

Recommended Competitor Actions

• Akamai’s merger news drops a bombshell that presents a real challenge for competitors. Competitors will need to take steps immediately to determine how they can best survive as the Akamai-alternative.

• Mirror Image needs to hit hard with its pricing alternatives to Akamai. This means it needs more marketing dollars to gain market awareness. Further, it needs to investigate how it can deliver an applications acceleration solution that can compete against Akamai.

• Limelight will need to examine how it can leverage its network and build-outs to help clients with application acceleration in addition to content distribution. It may also want to make its own acquisitions, and add European and Asia Pacific build-outs if it can swing the capital. This could position it solidly as a key alternative to Akamai.

Recommended End User / Customer Actions

• End users will find that the market for Akamai alternatives continues to decrease given Akamai’s elimination of competitors through acquisitions. Clients will want to pursue RFPs from Mirror Image and Limelight to determine if these players represent a good alternative.

• Clients may find the one-stop shop for content and application acceleration appealing and once the dust clears from the merger, can inquire as to how this can best be delivered from Akamai. Most companies will find few service alternatives for application accelerations in the market.

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