Limelight shares surge after Microsoft deal

By Ritsuko Ando

NEW YORK (Reuters) - Limelight Networks Inc said on Thursday it had expanded an online media distribution deal with Microsoft Corp, sending the shares of the digital content delivery company up as much as 20 percent.

Limelight (LLNW.O: Quote, Profile, Research) will provide more media streaming and delivery services for Microsoft (MSFT.O: Quote, Profile, Research) -- already a top customer -- under a multi-year technology agreement.

The two companies also agreed to license one another's technologies.

"We've had a three-year or so relationship with Microsoft and it really has been a fairly traditional supplier-customer relationship. This builds on that and extends it deeper," Limelight Co-Founder and Chief Strategy Officer Michael Gordon told Reuters in an interview.

"Microsoft has a very deep portfolio of intellectual property and has been for many years a leader in developing new technology."

The financial terms were not disclosed. Gordon said the deal would generate revenue starting in the third quarter, although this was already factored into its previously issued earnings outlook for the period.

The agreement helped to ease the concerns of some investors over the outlook for Limelight, which helps media and Internet companies deliver bandwidth-heavy services more reliably by finding less congested routes over the Web.

Limelight's share price has fallen about 60 percent since their market debut in June on worries about increasing competition from Akamai Technologies Inc (AKAM.O: Quote, Profile, Research), South Korea- based CDNetworks Co Ltd (073710.KQ: Quote, Profile, Research) and new technology companies.