Limelight Shares Drop, No MSFT Bid Seen

As it turns out, Microsoft (MSFT) was preparing an acquisition offer for an Internet company. It just wasn't Limelight Networks (LLNW), despite persistent rumor reports from Silicon Valley Insider and others. Microsoft's $44 billion takeover bid for Yahoo (YHOO) seems to rule out an acquisition of Limelight as well.

With a potential deal premium seemingly gone, shares of Limelight are down 8 percent in early trading at $6.12 a share, down 54 cents. Eric Savitz at Barron's reports that Jefferies & Co. analyst Katherine Egbert has cut her rating and price target for the content delivery network (CDN) operator, citing pricing pressures and the reality that a deal now "seems remote."

Back on Jan. 11 we reported Microsoft is building its own CDN infrastructure using technology it licensed from Limelight. It appears that the persistent rumors about a MSFT-LLNW deal were likely just market chatter generated by confusion about the two companies' existing partnership. Back in August Microsoft and Limelight announced that they would cross-license some technologies, and "cooperate on extending and improving their respective technology infrastructures."

Microsoft's media properties serve 460 million unique users per month in 234 countries. Company executives said the Limelight partnership "anticipates Internet audiences and content offerings that are orders of magnitude larger than today."