CAMBRIDGE, Mass. - Akamai Technologies, Inc. (NASDAQ: NASDAQ:AKAM), a global leader in cybersecurity and cloud computing, has emerged as the winning bidder for specific assets of Edgio, a company that recently filed for Chapter 11 bankruptcy. The assets include customer contracts from Edgio's security and content delivery businesses and non-exclusive license rights to its patent portfolio, as announced today.
The transaction excludes any assets connected to Edgio's network infrastructure. The acquisition is part of a bankruptcy sale process that began following Edgio's bankruptcy filing on September 9, 2024. The auction concluded this past Monday, with Akamai securing the winning bid. The sale is pending approval from the bankruptcy court, with a hearing scheduled for November 25, 2024.
Upon court approval, Akamai and Edgio will proceed with finalizing the transaction, which is expected to close in the fourth quarter of 2024, subject to standard closing conditions. Akamai plans to disclose further details regarding the financial implications of the acquisition following court consent.
The acquisition is poised to enhance Akamai's existing portfolio of security solutions and content delivery networks, reinforcing its commitment to providing robust online business protection and performance. The company has a reputation for its market-leading security solutions, comprehensive threat intelligence, and a global operations team dedicated to enterprise data and application defense.
Akamai's statement under the Private Securities Litigation Reform Act indicates that the forward-looking statements related to the transaction's terms, court approval, and anticipated closing date are subject to changes due to various factors. These include the bankruptcy court's decision-making process and the satisfaction of closing conditions, among other economic, political, and regulatory considerations in the U.S. and abroad.
This news is based on a press release statement from Akamai Technologies, Inc. Investors and stakeholders are advised to await further information once the court grants approval and the transaction proceeds towards completion.
In other recent news, Akamai Technologies has reported significant financial achievements, meeting revenue expectations for the third quarter. The company announced its first billion-dollar quarter, with total revenue reaching $1.005 billion, a 4% increase year-over-year. Akamai's security revenue rose to $519 million, a 14% increase, surpassing a $2 billion annual run rate, while compute revenue grew by 28% to $167 million. However, the company has projected a weaker outlook for the fourth quarter due to ongoing challenges in its delivery business.
Baird, the financial services firm, has adjusted its stock price target for Akamai from $120 to $115, maintaining an Outperform rating. Despite the delivery headwinds, Baird highlighted Akamai's security and compute segments, which are expected to continue experiencing double-digit growth and provide a stable foundation for future growth.
Akamai's recent developments also include a workforce reduction of 2.5% as the company transitions its focus towards cybersecurity and cloud computing solutions. The company's Q4 revenue projections are expected to be between $995 million and $1.020 billion, with full-year forecasts indicating 4% to 5% growth. The security sector is expected to grow by 15% to 17% in constant currency for the year 2024. Despite a projected 20-21% year-over-year decline in delivery segment revenue, Akamai has secured major contracts due to strong customer interest in security solutions and is driving growth in new product areas through strategic shifts in investments.
InvestingPro Insights
As Akamai Technologies (NASDAQ: AKAM) moves forward with its acquisition of Edgio's assets, investors should consider some key financial metrics and insights from InvestingPro that shed light on the company's current position.
Akamai's market capitalization stands at $13.27 billion, reflecting its significant presence in the cybersecurity and cloud computing sectors. The company's revenue for the last twelve months as of Q3 2024 was $3.97 billion, with a modest growth rate of 5.92%. This growth aligns with Akamai's strategic moves, such as the Edgio asset acquisition, to expand its market share and service offerings.
An InvestingPro Tip highlights that management has been aggressively buying back shares, which could signal confidence in the company's future prospects and potentially support stock prices. This is particularly relevant in the context of the recent acquisition, as it demonstrates a commitment to creating shareholder value alongside strategic growth initiatives.
Another InvestingPro Tip notes that Akamai's valuation implies a strong free cash flow yield. This could be advantageous for financing the Edgio asset purchase and future investments in its security and content delivery networks.
It's worth noting that Akamai's stock has experienced some recent pressure, trading near its 52-week low with a 21.16% decline over the past year. However, analysts predict the company will remain profitable this year, which could provide some reassurance to investors regarding the financial health of the company as it integrates the new assets.
For readers interested in a more comprehensive analysis, InvestingPro offers additional tips and insights that could be valuable in assessing Akamai's future performance in light of this acquisition.
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