Akamai inked a $900 million deal to acquire cloud computing company Linode, a move CEO Tom Leighton said will allow it to become “the world's most distributed compute platform from cloud to edge.”
Founded in 2003, Linode is a cloud hosting company that bills itself as an affordable alternative to public cloud giants like Amazon Web Services. Its website states it has 11 data centers which serve around 1 million customers worldwide. It has hitherto targeted developers, startups and small and medium businesses.
Today, Akamai is perhaps best known for its content delivery network (CDN) which doubles as an edge platform. It also provides security services, having acquired Asavie in October 2020 and Guardicore late last year to bolster its portfolio. Futuriom analyst Scott Raynovich recently flagged Akamai as a leader in the burgeoning secure access service edge (SASE) market.
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Speaking on a call with investors, Leighton explained the company believes the combination of Akamai and Linode’s capabilities “can solve customers' needs in ways that are not addressed in the market today, forming a powerful winning combination that will enable customers to build, deliver and secure their apps on the platform that powers and protects life online.”
“We see the acquisition of Linode as a transformational opportunity for Akamai,” he added.
Akamai COO Adam Karon noted Linode offers four core products: compute, storage, cloud orchestration and developer tools. Once the acquisition closes, he said Akamai’s compute portfolio will encompass five products, including compute; storage which marries Linode’s offerings with Akamai’s net storage; cloud optimization which includes Akamai’s global traffic manager, cloud wrapper and direct connect solutions; developer tools; and Akamai’s edge applications.
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The transaction is expected to close in the current quarter. Akamai expects the deal to add approximately $100 million in revenue to its top line in its fiscal 2022.
Raymond James analyst Frank Louthan wrote in a note to investors that Akamai’s plan to leverage its enterprise relationships to capture incremental cloud computing business could give it “somewhat of an advantage compared to other AWS/Azure competitors as they are a trusted vendor and partner for CDN and security.” He added there is a market of smaller enterprises that may be drawn to Akamai’s new solutions, but warned “history would suggest AWS and others will develop a competing product over time.”
“Longer term, we believe cloud computing will be a less successful diversification for Akamai,” Louthan concluded.
Q4 results
Akamai released Q4 results alongside the deal announcement. Revenue grew 7% year on year to $905 million in the quarter, with sales from its Security Technology Group up 23% to $365 million and Edge Technology Group revenue down 2% to $541 million. Net income jumped 41% to $161 million.