Limelight Networks Inc (LLNW)

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Limelight: Jefferies Says AKAM Should Buy LLNW; Sees Earnings Boost On Olympics Deal; Ups Rating To Buy
Posted by Eric Savitz
Limelight Networks (LLNW) shares are up sharply today after Jefferies & Co.’s Katherine Egbert upped her rating on the stock to Buy from Hold. Her price target goes to $6, from $4.

Egbert thinks that the company’s June quarter results, due August 12, “could spark a rally.” She notes that on July 29 the company disclosed that it won a contract from Microsoft and NBC to provide online access to 2,200 hours of live streaming Olympic video coverage and 3,000 hours of on-demand replays. She says there also have been media reports that the company is streaming the Olympics for both the BBC and China Central Television.

Egbert says it is “highly unlikely” that the current consensus estimates for the company include the impact of the Olympics. She estimates that each hour of on-demand viewing could bring 23 cents to Limelight, with each hour of live viewing bringing 36 cents.

She also says that “a large majority” of its customers are now off the architecture that was found to have infringed patents held by Akamai (AKAM). She says it is likely there will be no remaining infringing customers by the time the judge in the infringement case rules on pending motions and a permanent injunction sometime in 2009.

Meanwhile, Egbert also thinks that Limelight is a candidate to be sold to a larger service provider; she specifically proposes that Akamai should buy them. “Such a move could restore pricing integrity in the CDN market by reducing the number of competitors,” she writes. “It would also provide Akamai with an architecture that is highly optimized for the various types of streaming media.”

LLNW today is up 30 cents, or 8.3%, to $3.92.