Microsoft Picks Limelight for Content Delivery

Microsoft has picked Limelight Networks (LLNW) to power enhancements to the software giant's huge content delivery and streaming media infrastructure, the two companies announced today. Limelight's CDN network will be used to improve the scalability of Microsoft's online services, helping speed delivery of video, music, games, software, and social media. Under the agreement, Microsoft (MSFT) and Limelight will cross-license some technologies, and "cooperate on extending and improving their respective technology infrastructures."

The agreement is aimed at "radically improving user experiences" across Microsoft's media properties, which serve 460 million unique users per month worldwide. The companies said the multi-year agreement will allow them to take a long-term approach to enhancing Microsoft's ability to deliver streaming content.

"Our agreement with Limelight Networks anticipates Internet audiences and content offerings that are orders of magnitude larger than today," said Debra Chrapaty, Corporate Vice President of Global Foundation Services for Microsoft. "Today's digital media initiatives only hint at the full potential of the Internet as a channel for distribution of traditionally produced content and as a platform for the creation of new forms of media and entertainment content."

The announcement immediately boosted Limelight's stock, which has been hammered since the company lowered its revenue guidance in a recent conference call. In pre-market trading, Limelight shares are up $1.56 (18 percent) to $10.04 a share.

It's not immediately clear what the Limelight partnership will mean to Microsoft's use of other content delivery providers. Microsoft had been a large customer of Savvis' CDN service, which was sold to Level 3 earlier this year. At the time, Microsoft said it "looked forward to a continued relationship with Level 3." Microsoft has also used Akamai in the past, which resulted in some Microsoft services appearing to run on Linux.

In today's announcement, Microsoft was enthusiastic about its new partner. "Limelight's vision, service and technology leadership in Internet delivery of media is a perfect fit with our own vision and initiatives toward the future," said Chrapaty.

"Microsoft's vision for a connected experience closely aligns with our own, including delivery services for the next generation, high definition Internet," said Jeff Lunsford, chairman and CEO of Limelight Networks, who said his company earned the new role "based on our network and technology's performance in delivering video for MSNBC.com and game content and video downloads for Xbox Live."

The deal may also be good news for Limelight's data center providers. Limelight leases colocation space from Switch and Data, Telehouse and Equinix, which all operate major peering and interconnection points in multiple cities.

Limelight's customers including more than 700 of the world's top media and gaming companies, including Amazon, Belo Interactive, Brightcove, DreamWorks, Facebook, FOXNews.com, Metacafe, MSNBC.com, MySpace, NC Interactive, Valve Software and Xbox Live. The company went public though an IPO in June.