Bloomberg News

Akamai Rises Most in 19 Months on Acquisition of Cotendo

December 28, 2011

(Updates with closing share price in second paragraph.)

Dec. 22 (Bloomberg) -- Akamai Technologies Inc., operator of a server network that lets businesses speed data delivery, rose the most in more than 19 months after agreeing to buy startup competitor Cotendo Inc. for about $268 million in cash.

Akamai jumped 19 percent to $31.63 today in Nasdaq trading, its biggest one-day gain since April 29, 2010.

The acquisition will let Cambridge, Massachusetts-based Akamai expand its acceleration technologies for the Web-based cloud computing system used by customers such as phone companies and social networks. The deal also helps Akamai “maintain its leadership position and high margins” by eliminating a competitor, according to a research note from Gray Powell, an analyst at Wells Fargo & Co. in New York.

Akamai is paying about nine times Cotendo’s anticipated 2011 revenue of $30 million, according to Powell. The ratio makes the deal “expensive but worth it,” he said. The purchase price is less than the $300 million some investors had expected three weeks ago, said Powell, who rates the stock “outperform.”

Investors in Cotendo, founded in 2008, include venture- capital firms Sequoia Capital and Benchmark Capital, as well as Juniper Networks Inc., according to the startup’s website. Sunnyvale, California-based Cotendo has about 100 employees, half of them in Israel, where the company has a technology center, according to a statement today.

The purchase is Akamai’s second largest after the $2.19 billion acquisition of InterVU Inc. in 2000, according to data compiled by Bloomberg. Akamai has a market value of $5.68 billion and about 2,300 employees. It has declined 33 percent this year.

--Editors: Romaine Bostick, Jeffrey Tannenbaum

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net


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