* Netli acquisition joins two companies that offer application acceleration services
Many vendors take a hardware-driven approach to application acceleration. Two players that tackle the problem a different way, via managed services, have determined it makes more sense to join forces that compete with one another.
Akamai Technologies and Netli, which both espouse a services approach to speeding up application performance, last week announced plans to merge. The deal calls for Akamai to acquire Netli in exchange for 3.2 million shares of Akamai stock — which puts the current value of the transaction in the neighborhood of $178 million.
Both vendors offer services designed to improve the performance of Web- and Internet-based applications. It’s a hot area; research firm Gartner forecasts spending in the application acceleration market will grow from $967 million in 2004 to $3.3 billion in 2010.
Netli’s service offerings depend on a proprietary protocol to speed traffic across long-haul segments of the Internet. Web applications are optimized and made available to end users through Netli’s “application access points,” which are located close to Web application servers. The net effect is sub-second response times and more efficient asset utilization — without requiring changes to servers or clients, Netli claims.
Among the assets Akamai stands to gain from the buyout is the proprietary protocol, which Netli bills as a more efficient alternative to TCP. At the same time, Akamai is taking out a growing competitor in the application acceleration arena and gaining Netli’s customers, which include HP, Samsung and Thomson Financial. It also stands to gain from Netli’s existing reseller arrangement with Verizon Business.
Akamai expects to close the Netli deal later this quarter — making it Akamai’s third purchase in about 12 months. In November, Akamai announced plans to buy Nine Systems for $160 million to expand its video-streaming expertise. Last March it put up $130 million to buy content-delivery rival Speedera Networks.
Akamai runs the risk of losing its management focus if it becomes “stuck in the minutiae of merger integrations,” warns Counse Broders, a research director at Current Analysis. On the other hand, Akamai’s acquisitiveness will likely help it secure customers in the market for content and application acceleration services.
“End users will find that the market for Akamai alternatives continues to decrease given Akamai’s elimination of competitors through acquisitions,” Broders wrote in a recent research brief. “Clients may find the one-stop shop for content and application acceleration appealing and once the dust clears from the merger, can inquire as to how this can best be delivered from Akamai.”
