Limelight Buys EyeWonder

In a surprise acquisition, content delivery specialist Limelight Networks (NASDAQ:LLNW, news, filings) announced today the purchase of EyeWonder, a provider of interactive digital advertising, and especially video advertising.  Normally when I see a buy such as this it is a small one, but Limelight is shelling out $110M – $62M in cash and $48M in stock plus more stock if financial targets are achieved.  That’s 40% of the company’s cash reserves, which means that this move is a major part of Limelight’s strategy as we enter 2010.

The acquisition comes against the backdrop of a resurgence by Akamai (NASDAQ:AKAM, news, filings), which apparently lowered pricing dramatically in the fall.  Market conditions have become challenging for its competitors in recent months as a result.  As the largest pure-play challenger to Akamai’s dominance, Limelight has probably been feeling that pressure as much as anyone.  Whether it is a direct response or not, by buying EyeWonder Limelight strikes back on the value added front where Akamai earns half its revenue with less competition.

Notable of course is what Limelight did not do, which is merge with a carrier with deeper pockets and infrastructure on which to cut costs.  That’s something I have long thought could happen, but would have been a more defensive move. In fact, this purchase of EyeWonder takes them further away from that path, playing defense by improving the company’s offense and simultaneously raising the stakes.

Dan Rayburn has further details on the deal.

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Categories: Content Distribution · Mergers and Acquisitions