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Akamai Technologies, Inc. AKAM has completed the acquisition of select assets of the bankrupt media firm Edgio Inc. The acquired asset portfolio includes certain customer contracts from Edgio's content delivery and security businesses and the non-exclusive license rights to its patents. However, the deal excluded the buyout of Edgio personnel, technology or assets related to the network.
The completion of the buyout deal was made possible following the requisite approval last month from the U.S. Bankruptcy Court for the District of Delaware. Edgio filed for bankruptcy in September, putting $379 million worth of assets up for grabs. It aimed to use the court-supervised sale process to seek the highest bid for its assets to maintain uninterrupted video streaming and web security services to 935 global customers. Following the court-monitored process, Akamai emerged as the highest bidder for the said assets and was allowed to close the acquisition.
What AKAM Gained From the Transaction?
The deal is expected to be accretive to Akamai, offering it hundreds of new customers that potentially augment its revenue-generating capabilities. Customers will also gain immediate access to the full portfolio of Akamai’s cybersecurity and cloud computing services.
The company expects the transaction to generate incremental revenues of $9-$11 million in the fourth quarter of 2024 despite transition services costs of $15-$17 million. The transaction is anticipated to be dilutive to non-GAAP earnings by 3-5 cents in the fourth quarter, inclusive of the transition service costs.
For 2025, Akamai anticipates the transaction to generate $80-$100 million in revenues and $25-$30 million of transition service costs, resulting in an accretive non-GAAP net income of 15-20 cents per share. With potential cross-selling and up-selling opportunities, the deal is likely to unlock new revenue-generating avenues for Akamai. Consequently, the shares are likely to witness a healthy uptrend in the future.
Moving Forward
Akamai’s security offerings are poised to gain from higher demand for data computing at the edge, triggered by the rapid deployment of 5G and IoT devices. By leveraging AI (artificial intelligence) capabilities, its API (application programming interface) security solution effectively analyzes APIs, detects vulnerabilities and minimizes risks. With the growing use of APIs, the demand for such solutions is poised to rise among enterprises. These strategic initiatives are expected to drive commercial expansion and generate long-term benefits.