Limelight Soars On Good Report From Akamai Patent Hearing, New 'Buy' Rating (LLNW, AKAM)

A rare good day for Limelight Networks (LLNW) stock — which closed up 15% to $4.20. (Though it’s down 8.4% to $3.85 in after-hours trading.)

Why the jump? Two items relating to its patent war with archrival Akamai Technologies (AKAM), which Akamai has been winning.

First, a good note from Jefferies analyst Katherine Egbert, who attended yesterday’s patent hearing in Boston and published a more detailed report today than Reuters did last night. Egbert says the Federal judge seemed “positively disposed towards Limelight.” A permanent injunction would jeopardize about half of Limelight’s business.

Egbert still expects Limelight to be sold for around $6-7 per share, or more if it develops technology workarounds that don’t infringe on Akamai’s patent. Potential buyers include Level 3 (LVLT), AT&T (T), and Akamai.

Second, Wedbush Morgan analyst Kerry Rice began coverage of Limelight today with a “buy” rating, saying it’s likely that Limelight will announce a workaround during its Q2 earnings call — probably in August.

Rice assumes no permanent injunction, but notes that if one is granted, the appeals process could last “several quarters.” Fair enough, but if an injunction is granted, we think Limelight’s sales force will have a very tough time making deals during the appeals period.

See Also:
Judge: Too Early To Shut Limelight Down In Akamai Patent Case
What’s Limelight’s Non-Patent-Infringing Business Worth?
Limelight Networks Feeling Pricing Pressure, Q1 Misses

Disclosure: SAI Chairman Kevin Ryan is a major investor in Panther Express, which competes with Akamai and Limelight.

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