Akamai and Limelight Court Ruling Expected By End Of The Month

Lately, I've been getting a bunch of questions asking for the latest news on the Akamai and Limelight Networks patent suit. While there is not much news to talk about, Akamai and Limelight were back in court last month and there is a good chance the judge will issue a ruling by the end of this year.

Even if a ruling comes down in the next few weeks, it is unlikely that the judge will reverse the original decision in Akamai's favor and such a ruling would then just result in Limelight filing an appeal. Since the appeal process tends to move a lot faster, we can expect for both sides to be back in court probably by the second quarter of next year. When that happens, details of Limelight's workaround for the Akamai 703 patent will then be detailed and we'll get a lot more information on what exactly Limelight has done to circumvent the patent in their eyes.

It will also be interesting to see if Akamai files an appeal to any of the rulings from the Markman hearing in regards to how the court ruled on some specific language and the definition of certain technology. Some folks I have spoken to have mentioned that it might make sense for Akamai to contest a few of the rulings based on the interpretation of the technology. Whether or not this will happen is hard to say as most of the records and rulings from the court are not available to the public.

No matter what happens, this suit won't be ending anytime soon but a ruling this month could be important for Limelight. While Limelight has been a frequent target of take out rumors, anyone looking to acquire Limelight is going to wait until after the ruling when things are clearer. Even if the ruling only results in Limelight filing an appeal, any company looking to acquire Limelight will then be able to review their workaround and decide if they think the appeal process will be successful or will have a better handle on what damages may cost. Keep in mind, with the money Limelight has in the bank, even having to pay damages to Akamai does very little to impact Limelight's bottom line.

Limelight is reducing pricing in the market while at the same time increasing their margins, something I didn't see many folks talk about on their last earnings call. Last quarter they finished cutting a lot of the smaller customers from their network that weren't growing and they now have over 120 customers for small object delivery, ecommerce and enterprise services. They are starting to get some traction outside of the video delivery market and still continue to close big deals.

This is a very interesting time for Limelight as they are showing signs of added growth at a time when the market stinks and their market cap is down to $185 million. I still think Limelight gets acquired by a major telco next year but with the market being what it is, anyone not offering close to $8 a share and I think Limelight passes and holds out until the market improves. They have the cash to wait and don't need to be in any hurry to sell out. While there was some speculation three quarters ago that Limelight's CEO might be replaced if things did not improve by year's end, Limelight has had a couple of good quarters in a row and last week renegotiated CEO Jeff Lunsford's compensation package.

Whether or not Limelight can do anything to improve their stock price remains to be seen, but the company does seem to be building a lot of momentum for the New Year and is expected to drive a lot of marketing and product focus away from video and into small object delivery in 2009. That's probably not good news for other CDNs who have always been able to win business that required both video and small object delivery since Limelight has typically focused on mostly video related content.

Disclaimer: I have never bought, sold or traded stocks in any public company ever, including Limelight and Akamai.