UPDATED 14:10 EDT / DECEMBER 23 2011

Akamai Snatches up Another Competitor, Cotendo, for $268 Million

Akamai has acquired Israeli content delivery network operator Cotendo for $268 million, in addition to the assumption of unvested options. The sum falls short of earlier reports predicting a price tag ranging between $300 million and $350 million.

Cotendo leverages a network of 30 data centers to be able to stream content to a user via a shorter physical route. This process speeds up delivery time, and is similar to what Akamai is doing in terms of content delivery optimization. Cotendo’s competition with Akamai extended beyond that to better performance at sometime lower rates, so the latter decided to acquire it.

AllThingD’s Arik Hesseldahl provided the historical evidence:

“That made it an obvious Akamai target, given its history of acquiring rivals — usually after suing them. In 2005, it took out Speedera Networks for $130 million, after a contentious patent lawsuit between them. Akamai had sued Cotendo last November. So the next time Akamai sues someone, set your stopwatch, because the defendant may be the next one to be acquired.”

The deal goes a bit beyond a straight forward competition. Earlier this year Akamai’s stock took a nose-dive after it announced it’s having difficulties to keep up with other vendors, and the company is under pressure to regain a strong position in the CDN market.

One of the things Akamai is doing in order to achieve that goal, in addition to M&A, is reinforcing its management. In October they hired Kumud Kalia to serve as the new chief information officer, and appointed Rick McConnell as EVP of products and development.  All this effort has been paying off to some extent.  Akamai scored a contract with Apple this year to optimize traffic for the Mac App Store after Lion debuted, and users flocked to the online storefront in order to download the OS.


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