Lots of “Microsoft to buy…” rumours banging around these days, and here’s another one: Microsoft is interested in buying content-delivery-network Limelight Networks. A CDN industry insider (not at Limelight) tells us he has heard this twice in recent days from independent sources.
Why would Microsoft want to buy Limelight, the unprofitable No. 2 player in the CDN business behind Akamai (AKAM)? It’s indeed a puzzlement. Here’s one explanation:
Microsoft’s entire business infrastructure is built around desktop servers and PCs. The entire business infrastructure of Microsoft’s most fearsome competitor Google, meanwhile, is built around the wave of the future– “cloud computing”–in which millions of devices interact with vast data centres and server farms out on the network.
Microsoft is spending heavily to try to stop losing ground to Google in this arena, but, so far, its efforts have been largely unsuccessful. In recent months, therefore, Microsoft has unveiled an intelligent and aggressive new strategy–one in which it buys instead of builds (see the $6 billion aQuantive acquisition, for example).
Microsoft certainly doesn’t need to be in the CDN business, but perhaps it believes Limelight’s infrastructure and expertise will help accelerate its transition to cloud computing. Specifically, instead of buying CDN services from Akamai, et al, Microsoft could now float MSN, Office Live, Silverlight, and other Software-As-A-Service products on top of the Limelight infrastructure.
After a cataclysmic public market debut, in which it blew its first quarter out of the box, Limelight is trading at a paltry $6 ($550 million valuation). Needless to say, this is couch change for Microsoft, which is losing $1 billion a year in its Internet division. So a Limelight deal would basically be a tuck-in.
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