March 16, 2005 8:15 AM PST

Akamai snaps up rival Speedera

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Akamai Technologies has signed an agreement to buy rival Speedera Networks in a stock deal described by the two rivals as a merger.

Akamai executives said Wednesday that the buyout is aimed at improving Akamai's ability to compete against larger providers of Web content service through the addition of Speedera's products and employees. Akamai said the deal will also prevent it from having to make sizeable investments in expanding its operations infrastructure. Both companies, founded one year apart in the late 1990s, are credited with helping to establish the market for outsourced Web content and applications delivery services.

Under the terms of the deal, Akamai will exchange 12 million shares for all of privately held Speedera's outstanding shares, its company-granted stock options and its India-based subsidiary. Based on Akamai's closing stock price Tuesday, the deal is valued at about $130 million. The rivals said they expect the transaction to close sometime during the second quarter.

Akamai executives said their biggest incentive in landing Speedera was gaining access to its customers, to which Akamai hopes to sell additional services and thus increase revenue over the next year. Paul Sagan, Akamai's president, said that the addition of large Speedera customers such as Advanced Micro Devices, DoubleClick, Lowe's and Macromedia should give his company the ability to create new sales opportunities shortly after the deal closes.

"We believe this deal will benefit our customers, employees and shareholders," Sagan said during a conference call Wednesday. "We believe our proven ability to sell new features and functionality to existing customers will be demonstrated with many of Speedera's customers."

Sagan said that Cambridge, Mass.-based Akamai also expects to benefit from operational efficiencies that will allow the company to reduce costs and achieve greater economies of scale. He said another goal of the merger is to improve Akamai's bandwidth sourcing arrangements and Web traffic management capabilities.

Sagan said on the call that Ajit Gupta, CEO of Santa Clara, Calif.-based Speedera, will remain with the company after the deal closes in order to help out during the transition period after the merger. He did not indicate whether Gupta remain with Akamai in the long term and gave no indication whether jobs will be cut at either company.

As part of the acquisition agreement, the two companies put a halt to their ongoing litigation, which included a trade secret lawsuit in California and a patent infringement case in Massachusetts. Sagan said it made more sense to move forward with a merger than to wait for an outcome in those claims, despite rumors that Akamai was close to winning at least the California lawsuit.

"I think it's better to settle these differences as a business matter and not in the courts," he said. "A lot of damage could have been done to the business in the meantime."

 

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