Limelight, Akamai shares fall as Netflix shifts traffic

Tue Jun 5, 2012 3:06pm EDT

A screen grab shows the access to Netflix online, as displayed on a television screen, in Encinitas, California July 25, 2011. REUTERS/Mike Blake

A screen grab shows the access to Netflix online, as displayed on a television screen, in Encinitas, California July 25, 2011.

Credit: Reuters/Mike Blake

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(Reuters) - Shares of content delivery companies Limelight Networks Inc (LLNW.O) and Akamai Technologies Inc (AKAM.O) fell after Netflix Inc (NFLX.O) said it is shifting more video streaming traffic to its own content delivery network.

Shares of Limelight, which offers content delivery services to media clients using less-congested routes over the Web, fell as much as 17 percent, while bigger rival Akamai fell 9 percent in morning trade.

"We'll continue to work with our commercial CDN (content delivery network) partners for the next few years, but eventually most of our data will be served by Open Connect," Ken Florance, vice president of content delivery at Netflix, posted on a blog on June 4.

Video rental company Netflix brought in 10 percent of Limelight's revenue last year.

The migration of traffic away from commercial CDNs is a negative development — more likely weighted towards Limelight given its sizable Netflix exposure, Jefferies analyst Aaron Schwartz wrote in a note.

"This is not Netflix's first effort at bringing CDN capabilities in-house, so there will be questions on credibility," he added.

Limelight shares were trading down 7 percent at $2.49, while Akamai shares were trading down 5 percent at $26.66 on Tuesday on the Nasdaq. Level 3 Communications Inc (LVLT.N), which also counts Netflix as a customer, fell 3 percent.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Supriya Kurane)

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