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Why Akamai Is a Better Buy Than Limelight

June 06, 2014 | About:
jaggom

jaggom

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Akamai (AKAM) and Limelight (LLNW) are two completely different prospects that investors can consider in the content delivery services space. Both have been performing differently. Let's take a look at which one suits investors' portfolios the best.

Analyzing Limelight

Limelight is a global leader in digital content delivery. The company is seeing weakness in its business as it reported a loss. Limelight has a market leader image and it has been always impressive with results and services. The main reason for the company losing market share can be seen with the lack of competitive products. Its peers working aggressively with their strategies to get hold of market share has caused Limelight to lose its share in the market. The company is out on the front foot to take aggressive moves for a strong turnover.

Though the company is seeing weakness all over, its CEO is hopeful that Limelight is making progress in its turnaround efforts. Limelight is focusing on various aspects to improve its profitability. It is making substantial investments in improving its processes and infrastructure.

Besides this the company is quite worried about the separation of Netflix from Limelight. But it would hardly affect the company as contribution of Netflix to Limelight was just 20%. The company is geared up to focus on profitable ventures. It is purposely deemphasizing unprofitable accounts and is laser-focused on customers with high value. With this, Limelight is targeting profitability, ensuring this momentum to roll out in the future as well.

Limelight, in the course of innovation, has come up with new billing system. The company is expecting that investments made in this will lead to great profits in future as the customers take time to adopt new technology. With such expectations Limelight is making innovation in its quote-to-cash process.

Moving on, Limelight is having aggressive investment strategies as well. It is making investments in network and software products. It is mainly seeking opportunities in the lower-cost geographies with their development. Limelight is making further enhancements and upgrades to its network to expand capacity and improve quality while increasing efficiency. The success of investment can be seen in the fact that the investments made in its product led Limelight to outperform its key CDN competitors globally.

On the international front, the company is also seeing growth opportunities from overseas market. Now looking at the ratios, the present scenario doesn’t appear good for Limelight. It doesn’t have a trailing and forward P/E as a result of loss. But in a long run the company will gain traction as it is growing with 12.0% in five years. Also, the company has a robust outlook and it is making advances to improve. But for investment, the company can be a good investment in the future, though as of now investors should see Limelight Networks Inc. from the sidelines until there are any concrete signs of the company gaining market share.

What About Akamai

Akamai reported robust first-quarter results, with all of its products performing noticeably well. Also, Akamai was busy organizing various live events such as winter games in Sochi and NCAA Basketball Championship in last couple of quarters that made modest contribution to its revenue.

Consequently, its revenue was up 23.37% to $454 million as compared to $368 million in the first quarter of 2013. Also, its non-GAAP net income rose 13% to $105 million, or earnings of $0.58 per share, from $93 million, or earnings of $0.51 per diluted share, year on year.

It has also forecast its second quarter revenue guidance of $464 million to $478 million, which represents approximately 22.8% to 26.5% year-on-year growth. And also, it expects its earnings in the range of $0.53 to $0.57 per share for the second quarter. Analysts had been modeling revenue of $459 million and earnings of $0.53 per share in the second quarter.

Conclusion

Akamai has been performing better than Limelight. But Limelight is trying its best to get better. Investors should keep both stocks on their radar if they are looking to invest in the content delivery space.


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