Arik Hesseldahl

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Akamai Confirms the Rumors, Nabs Cotendo for $268 Million

Another Israeli tech start-up has wound up in the hands of a U.S. company. Earlier this week, Apple appeared to have acquired the Israeli chip start-up Anobit.

This time the target is Cotendo, a company that uses a network of 30 data centers distributed around the world to put video content physically closer to consumers, and thus speed up delivery, especially to mobile devices. The acquirer is Internet concern Akamai, which says it will pay $268 million, plus the assumption of unvested options.

Cotendo had been reported to be the subject of a bidding war between Akamai and rival Juniper Networks. Breathless reports at the time, sourced to enthusiastic Israeli newspapers, valued Cotendo as high as $350 million. The deal will close during the first half of 2012.

Even at the lower price, the deal marks a nice exit for several U.S.-based venture capital funds. 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 had grown into an Akamai competitor, with a reputation for being faster at some things than Akamai, and also cheaper to boot. That made it an obvious Akamai target, given its history of acquiring rivals — usually after suing them. In 2005, it took out Speedera Networks for $130 million, after a contentious patent lawsuit between them. Akamai had sued Cotendo last November. So the next time Akamai sues someone, set your stopwatch, because the defendant may be the next one to be acquired.

Akamai’s statement on the deal is below:

Akamai to Acquire Cotendo

Combined technology and teams expected to help accelerate pace of innovation in cloud and mobile optimization

CAMBRIDGE, MA and SUNNYVALE, CA – December 22, 2011 – Akamai Technologies, Inc. and Cotendo announced today that the two companies have signed a definitive agreement for Akamai to acquire Cotendo.

Helping to mitigate the challenges of operating in a hyperconnected world, Akamai provides a secure platform over which businesses can engage users across the Web, mobile, cloud, or a mix of public and private network environments. Cotendo offers an integrated suite of Web and mobile acceleration services. The combination of the two companies’ technologies and teams is expected to increase the pace of innovation in the areas of cloud and mobile optimization.

“As we look to accelerate growth across the dynamic landscapes of cloud and mobile optimization, we are excited to be joining forces with Cotendo,” said Paul Sagan, president and CEO of Akamai. “Cotendo’s technology, partnerships and people are a strong complement to Akamai. Together, we believe there is tremendous opportunity for our combined technologies as enterprises embrace the move to the cloud and seek solutions for an increasingly mobile world.”

“The Cotendo team is very proud of our accomplishments in delivering proven and effective solutions for accelerating Web and mobile assets. By combining our innovative technology and employees with Akamai, we expect our customers and partners will gain access to a comprehensive, global platform and wider portfolio of leading-edge services supported by some of the most experienced providers in the industry,” said Ronni Zehavi, CEO and co-founder of Cotendo. “We look forward to working with Akamai in an effort to create the strongest offering in the industry.”

Founded in 2008, Cotendo is headquartered in Sunnyvale, CA, with a technology center in Israel. Cotendo currently has approximately 100 employees, with over 50 based in Israel.

Under terms of the agreement, Akamai will acquire all of the outstanding equity of Cotendo in exchange for a net cash payment of approximately $268 million, after expected purchase price adjustments, plus the assumption of outstanding unvested options to purchase Cotendo common stock. The closing of the transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to occur in the first half of 2012.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik