CNET también está disponible en español.

Ir a español

Don't show this again

Mobile

Akamai IPO crowning interest in content delivery

In the business of reducing Internet traffic congestion, Akamai's IPO comes at a time when a small yet competitive industry is in rapid flux, luring giants Cisco, Apple Computer, and Microsoft.

In Hawaiian, Akamai means intelligent or clever, but to investors awaiting the Internet content delivery service company's initial public offering this week, Akamai is just hot.

In the business of reducing Internet traffic congestion, Akamai is expected to start trading on Friday. The start-up last week increased its price range to $16 to $18 a share, up from its original range of $11 to $13. The company will offer 8 million shares, up from 6 million, and expects to raise $144 million.

Analysts say the pre-IPO firm--at just 18 months old--is already worth more than $1 billion.

CNET TV: Akamai IPO forecast
CNET TV: Akamai IPO forecast
Akamai's promise has lured the attention of industry giants Cisco Systems, Apple Computer, and Microsoft, and captured the business of such companies like Yahoo, Disney's Go Network, and CNN. Analysts expect the nascent market, which revolves around getting Web content to end users faster by keeping it off the most congested parts of networks, to grow to $2.5 billion by 2002.

Cambridge, Massachusetts-based Akamai's (pronounced AH-kuh-my) IPO comes at a time when the small yet competitive Internet content distribution industry is in rapid flux. Yesterday, hosting company Digital Island announced a $630.5 million merger with Akamai's main competitor, Sandpiper Networks.

The IPO should also take advantage of investors' current taste for companies that provide the plumbing for doing business on the Web, according to Stephen Lacey, managing editor of the IPO Reporter, who noted Sycamore Networks' first-day trading run-up as an example. Last Friday, Sycamore's shares rocketed from 38 to more than 270 before closing at 184.75.

Analysts speculate Akamai's stock could close at $40 a share on its first trading day.

"Akamai is definitely the hot deal of the week," Lacey said.

Jupiter Communications analyst Zia Wigder said the Digital Island-Sandpiper deal will lend an added boost to Akamai's offering. "It's good timing for them," she said.

"This is Sandpiper's IPO," added James Linnehan, a financial analyst with Thomas Weisel Partners, of yesterday's deal. "This is the way for them to get the proceeds [of an IPO] without the pain of a roadshow."

Pushing the pages
On the Net, Akamai is a behind-the-scenes player whose service guarantees 1.5 to 10 times faster delivery of Web content and 100 percent reliability. The service requires no additional software on the client's end.

Akamai aims to end Web waits Akamai and Sandpiper sell their services mainly to content companies, such as Yahoo and CNN. Inktomi, another caching company, primarily targets Internet service providers such as America Online. The duo depends on hundreds of strategically placed servers to ease congestion on the Internet and to provide faster downloads. Other companies, such as Edgix, are using satellite technology to beam content via satellite to servers within ISP or cable networks.

With roots within MIT's math department, Akamai uses a network of servers hosted by the world's largest ISPs. The ISPs host bandwidth-heavy content for Akamai's customers locally so when users download pages, the content they are grabbing doesn't travel across multiple and congested networks. Web hosting companies such as Exodus have been scrambling to add caching services, which is the main reason Digital Island bought Sandpiper.

"If you don't have Akamai or Sandpiper all the files have to be aggregated in a data center and pushed to a customer and that takes a lot of bandwidth," said Linnehan. "With Akamai or Sandpiper they cache from multiple sources. It takes far less time to download."

Impressed with the technology, Microsoft last month agreed to invest $15 million in Akamai, giving it about a 1 percent stake. Cisco also purchased Akamai's Series E convertible preferred stock for roughly $49 million, worth about 4 percent of the company. Apple invested $12.5 million in the firm in June.

Meanwhile, Thousand Oaks, California-based Sandpiper Networks, founded in 1996, reported more than $28.1 million in investments over the past year, from companies including America Online, Inktomi, Eagle New Media Investment (an investment arm of the Times-Mirror Company), Hambrecht & Quist's Access Technology Partners, and Bayview Investors (an affiliate of BancBoston Robertson Stephens).

The company's customers include CNBC.com, E! Online, Intuit, and MusicNow.

But for the most part, most of the analyst and media attention has rested on start-up Akamai.

"Right out of the gate, Akamai pulled in a lot of clients very quickly," said Yankee Group analyst Steve Robins. "Has the space been tightly contested? Yes. But Akamai is legitimately doing pretty well. The buzz is real."