Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Akamai, Juniper Said to Be Contending for Israeli Start-Up Cotendo

Israeli media have been buzzing in the last day or so about a possible takeover of a start-up called Cotendo. As reports in newspapers there have it, Cotendo is the subject of a bidding battle, pitting Juniper Networks and AT&T on one side versus Akamai, over an acquisition said to be worth as much as $350 million. As the Israeli publication Globes puts it, this would be one of the most successful exits for an Israeli start-up in the last decade.

It wouldn’t be a bad exit for a bunch of U.S.-based venture capital funds, either. Cotendo raised $7 million from Sequoia Capital and Benchmark Capital in 2009, and then another $12 million in a round joined by Tenaya Capital last year. In June, it took a $17 million strategic investment from Juniper and Citrix Systems.

Cotendo is an Akamai competitor. Its content delivery system uses a network of distributed servers around the world to put content physically close to consumers, and it specializes in speeding up delivery to mobile phones and tablets, which is a lot like the business Akamai is known for. The thing about Cotendo is that it has a reputation for being faster at some things than Akamai, and also cheaper.

Akamai has been known to buy competitors. In 2005, it took out Speedera Networks for $130 million, after a contentious patent lawsuit between them. Part of the story driving the Akamai takeover chatter is the fact that Akamai sued Cotendo last November. Akamai CFO J.D. Sherman will be speaking at a Credit Suisse conference in Phoenix on Wednesday. Maybe he’ll shed a little light on the situation.

Meanwhile, analyst Brian Marshall of ISI likes the idea of Juniper acquiring Cotendo in a joint deal with AT&T. Since AT&T is a big Juniper customer, accounting for about 8 percent of sales, and AT&T is also a big Cotendo customer, it would mean good things for Juniper’s relationship with AT&T. If the numbers being reported are correct, it would amount to about 10 percent of Juniper’s cash on hand, which was about $3.4 billion as of the quarter ended Sept. 30. It would be a much bigger deal for Akamai, which had $688 million in combined cash and short-term investments as of the same date.

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