Posted by : Randy Cooper in (CDN)
By Eric Savitz
Shares of both Akamai (AKAM) and Limelight Networks (LLNW) are trading lower on increasing concerns about pricing in the content delivery network sector.
As I previously noted, Merriman Curhan Ford analyst Richard Fetyko last night cut his rating on Akamai to Sell from Hold, asserting that AKAM is losing CDN business to Limelight and Level 3 (LVLT) as a result of pricing that is far above the competition. Meanwhile, Pacific Crest analyst Chad Batley today cut his rating on LLNW to Sector Perform from Outperform, while cutting estimates on both Limelight and Akamai.
Bartley writes that his checks find that CDN pricing pressure got worse in the third quarter, due to a new price strategy by Akamai on large-volume media and entertainment deals, and “ongoing aggressive pricing” by Limelight, Level 3 and various telcos. In contrast to Fetyko’s comments on Akamai, Bartley says that Akamai will occasionally sign deals at a slight premium to the competition, but that in the majority of competitive deals it is pricing at or below its rivals.
In Bartley’s view, AKAM should post Q3 EPS about in line or slightly above his forecast of 36 cents a share; he anticipates Q4 guidance of 35-39 cents, versus current consensus of 38 cents. For 2010, he cuts his revenue forecast to $864.5 million from $892.5 million, with EPS of $1.49, down from $1.61.
For LLNW, he now sees 2010 revenue of $134.7 million, down from $144 million, with a loss of 20 cents, compared with a previous estimated loss of 12 cents.
In today’s trading:
* Akamai is down 91 cents, or 4.6%, to $18.77.
* Limelight is down 37 cents, or 9.1%, to $3.69