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.
AKAM’s Zacks Rank
Akamai currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Key Stock Picks
InterDigital, Inc. IDCC sports a Zacks Rank of 1 at present. It has a long-term growth expectation of 15%. IDCC is a pioneer in advanced mobile technologies enabling wireless communications and capabilities. The company designs and develops a whole range of advanced technology solutions for use in digital cellular as well as wireless 3G, 4G, and IEEE 802-related products and networks.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy), is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experiences. Arista delivered an earnings surprise of 14.8%, on average, in the trailing four quarters. It is well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Qualcomm Incorporated QCOM, carrying a Zacks Rank #2, is another solid pick. The company is well-positioned to meet its long-term revenue targets driven by solid 5G traction, greater visibility and a diversified revenue stream. Qualcomm is increasingly focusing on the seamless transition from a wireless communications firm for the mobile industry to a connected processor company for the intelligent edge.
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