AT&T (NYSE: T) is one of three companies rumored to be pursuing Israeli CDN Cotendo, which reports say carries a $300 million to $500 million price tag.
A Sunday report in financial website Calcalist said Akamai Technologies (Nasdaq: AKAM), which in November 2010 sued the company alleging patent infringement, currently is in advanced talks to buy its competitor, but Israel's Globes said the company also has talked with AT&T and Juniper Networks (Nasdaq: JNPR). The company has been for sale since Akamai filed suit against it.
Last year, reports said AT&T was in the process of integrating Cotendo's app acceleration and dynamic site acceleration with its network, posting the first challenge to what had been a business of one--Akamai--to this point. The telco said it would charge 50 percent of what Akamai charges and be "extremely happy" with the margin.
AT&T currently has a four-year, $30 million distribution deal with Cotendo, and Juniper has taken part in an earlier fundraising round. Cotendo has raised just $39 million in three funding rounds from venture capital funds Sequoia Capital, Benchmark Capital and Tenaya Capital, since it was founded in 2008.
Cotendo's technology speeds up websites and--what is likely more importantly to all three suitors--helps accelerate the delivery of streaming video and other dynamic content like real-time communications and e-commerce. Cotendo counts companies like Facebook, Zynga, AOL, Microsoft (Nasdaq:MSFT) and Google (Nasdaq:GOOG) among its customers. It is estimated to be on track for revenues of $50 million this year.
According to Jim Davis, senior analyst with Tier1 Research, "Dynamic site and application acceleration services such as those offered by Cotendo will be a key growth driver for the CDN market through 2012, when it is expected to reach the $2 billion mark. Network performance will become increasingly important as enterprises continue to ramp up adoption of cloud-based applications during that time frame."
With speculation of a potential merger between Limelight (Nasdaq: LLNW) and Level 3 (NYSE: LVLT) still making the rounds, an acquisition of Cotendo by Akamai would help it maintain its hold on the CDN market.
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