Comverse plunges after disappointing results
Akamai Technologies faces stiff competition in talks to acquire web application acceleration rival Cotendo for $300-350 million.
Sources inform ''Globes'' that two Cotendo Ltd. strategic partners, Juniper Networks Inc. (Nasdaq: JNPR) and AT&T Inc. (NYSE: T) have joined the race against Akamai Technologies Inc. (Nasdaq: AKAM) to acquire the website and mobile applications accelerator solutions developer. Earlier media reports said that Akamai was in advanced talks to acquire the company for $300-350 million.
Cotendo CEO Ronni Zehavi, VP R&D Udi Turgeman, and CTO David Drai, all former executives at Commtouch Software Ltd. (Nasdaq: CTCH; TASE: CTCH), founded the company in 2008. The company is headquartered in Silicon Valley and has offices in Kfar Netter, near Netanya in Israel.
Cotendo's customers include tier-1 telecommunications vendors, e-commerce sites, social networks, and advertising networks. The company has raised $39 million from Benchmark Capital, Sequoia Capital, and Tenaya Capital, as well as strategic investments by Juniper and Citrix Systems Inc. (Nasdaq: CTXS). The founders presented their idea of new and cheaper products to transmit web content to Sequoia Israel managing partner Haim Sadgar and received $3 million two weeks later.
If Cotendo is acquired at the amount reported, it will be one of the most successful exits by an Israeli high-tech company in the past decade, with a ten-fold return on capital - $100 million - for its first investor, Sequoia, and a return of 2-7 fold for the other investors.
The interest in Cotendo is driven by the change in online content consumption in recent years. Whereas in the early 2000s, most content comprised static content of text and pictures, current content involves much more moving content, such as video, e-commerce, and real-time communications, which is more sensitive to delays and cut-offs. Content volume has also grown massively.
The change in internet content needs better solutions for managing it - Dynamic Spectrum Access (DSA) for improving website applications performance, which Contendo provides. The company currenly has 300 customers, including online giants such as Facebook, Zyngo, MyYearBook, and Israeli start-up ConduIT Ltd. Sources estimate that Cotendo's revenue will reach $50 million this year.
Akamai is the company that invented DSA in 1998, and until recently was the only company offering solutions in that field. Co-founder and CTO Daniel Lewin was an Israeli who was killed in one of the planes that crashed into the World Trade Center on September 11, 2001. The other co-founder is Tom Leighton. The company's technology keeps popular content at a point physically close to the user, thereby reducing loads on content providers and service providers' Internet servers. Akamai's market cap is $4.7 billion, following a 50% fall in its share price since the beginning of the year.
Cotendo's entry into the market three years ago slashed Akamai's prices and Cotendo steadily won market share and customers from it. Cotendo's prices are half the prices of Akamai, making it a persistent rival, despite its small size. Cotendo's strategic partnership with AT&T, enabling it to directly compete against Akamai, further increased the pressure on it to do something to stop Cotendo.
Akamai sued Cotendo for patent infringement in November 2010, with the objective of either acquiring Cotendo's or drowning it in legal fees. Since the lawsuit was filed, Cotendo has been up for sale. The potential buyers are Akamai, a serial suer that has previously acquired companies it sued; and AT&T, which might exercise its first refusal rights to acquire the company. A final decision will be made in a few weeks.
The content delivery network (CDN) market is undergoing consolidation. Two companies - Limelight Networks Inc. (Nasdaq: LLNW), and Level 3 Communications Inc. (Nasdaq: LVLT) are considering a merger.
A few months ago, Zehavi told "Globes", "Akamai is known as a serial suer, and for us this is proof that our product worries it." He also spoke out against a premature acquisition, saying, "We're not a company that will disappear. We've developed an infrastructure, not a feature. We're here to create a great and profitable company."
Zehavi was unavailable for comment on this report, as he is on a Thanksgiving vacation.
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011
You comment was recieved and soon will be published.
Thank you for posting your comment, which will be reviewed for publication.
Load more comments
Fourth fiscal quarter revenue fell 9.3% to $166.5 million.
Data analytics co Fundbox raises $17.5m
Fundbox processes invoices, allowing small businesses to fix their cash flow.
Myze locates best credit card offers
Myze trolls credit card companies' sites to match offers to cardholders.
Wix jumps on reaching 46m users
The company's market cap is $853 million, 38% above its IPO, but 27% below its record.
Digital marketing co Kenshoo raises $20m
The company will use the funds to develop its predictive media optimization.
Kaltura's president Michal Tsur: We plan IPO
The video creation company is reportedly worth up to $1 billion.
Digital picture organizer Flayvr raises $2m
The company will use the proceeds to expand US operations and extend its platform.
AudioCodes to build Beersheva R&D center
The company will invest NIS 100 million in the new cloud technologies center.
Cloud security co GreenSQL raises $7m
The company will use the proceeds to support international business expansion.
Amazon, Google, Microsoft battle to host developers
The Internet giants want to attract developers to build apps on their cloud-computing infrastructures.
Internet of Things co Neura raises $2m
Neura will use the funds to develop technology to understand behavioral patterns.
Video optimization co Beamr raises $9.5m
Marker and Google chairman Eric Schmidt's Innovation Endeavors led the investment.
Stratasys acquires Interfacial Solutions assets
Interfacial Solutions provides thermoplastics R&D and production services.
Amdocs CEO: We strive for 5% annual growth
Eli Gelman fears complacency as the company expands in emerging markets.
Intel Israel development center to remain vital
Intel Israel president Mooly Eden tells "Globes" that Israel remains central to the chip company's plans.
SuperCom share price skyrockets 920%
SuperCom CEO Arie Trabelsi tells "Globes" how he has turned around the identity solutions company.
IMI enters cyber security arena
As privatization approaches, Israel Military Industries bets on a market with enormous growth potential.
Wanted: Arts majors for high-tech
Technology companies are looking for creativity, flexibility, and the ability to think outside the box.
2013 boom year for Israeli high-tech
In the first half of the year, there was a 52% rise in demand for mobile and web developers, and salaries are up as well.
CyberArk reboots network security
CEO Udi Mokady: Media reports on electronic surveillance make explaining our product unnecessary.
Architect Eli Attia: Google stole my life's work
Eli Attia has developed an innovative building design and construction concept that Google sees generating $120 billion annually.