Akamai to acquire cloud provider Linode for US$900m

Akamai has agreed to purchase Linode for US$900 million to make cloud computing, simpler, more affordable, and more accessible for developers to consume.

The digital experience vendor said its proposed acquisition of Linode, which bills itself as an alternative to Amazon Web Services, will allow Akamai to create a unique cloud platform that builds, runs, and secures applications from the cloud to the edge. The acquisition is expected to close this quarter and add roughly US$100 million in revenue and US$0.05 to US$0.06 of earnings per share in the current fiscal year.

“The opportunity to combine Linode’s developer-friendly cloud computing capabilities with Akamai’s market-leading edge platform and security services is transformational,” Akamai CEO Tom Leighton said. “This is a big win for developers who will now be able to build the next generation of applications on a platform that delivers unprecedented scale, reach, performance, reliability and security.”

Akamai’s stock is down US$5.86 (5.28 percent) to US$105.17 in after-hours trading Tuesday, which is the lowest the company’s stock has traded since 28 October 2021. The company also announced Tuesday that revenue for the quarter ended 31 December 2021, jumped 7 percent to US$905 million while net income surged to US$161 million, or US$0.97 per share, up 42 percent from US$113 million, or US$0.68 per share, the year prior.

Linode was founded in 2003, hasn’t raised any outside funding, and employs 238 people, up 6 percent from 224 workers a year ago, according to LinkedIn and Crunchbase. The company was founded and led by Christopher Aker, who said being acquired by Akamai marks a major step forward for Linode’s current and future customers.

“Customers face new challenges as cloud services become all-encompassing, including compute, storage, security, and delivery from core to edge,” Aker said in a statement. “Solving these challenges requires tremendous integration and scale with Akamai and Linode plan to bring together under one roof.”

Linode offers compute, storage, cloud orchestration, and developer tools sold via traditional cloud models including online trial and purchase, according to Akamai’s investor presentation. Going forward, Akamai said its compute portfolio will be sold via Linode’s traditional cloud models as well as Akamai’s globally located enterprise salesforce and robust channel ecosystem.

Akamai currently has a US$1.34 billion security business as well as a US$2.13 billion content delivery network (CDN) business and going forward plans to combine Linode’s technology with the company’s existing edge application and net storage capabilities to form a new compute division. Unlike Akamai’s security business – which grew by 26 percent in 2021 – sales for the company’s CDN business were unchanged.

The company expects its combined offering with Linode to appeal to developers by offering the core cloud compute functionality, ease of use, and tool they need as well as enterprises by providing the security, uptime, and reliability they require. The company said it can drive modern use cases as new applications take advantage of the throughput, performance, and distribution of Akamai’s network.

Potential use cases for the joint Akamai-Linode offering span the gamut from health care and sports to the Internet of Things (IoT), e-commerce and the metaverse, according to the company. For example, a hospital could leverage Akamai to create a platform that captures and archives videos of surgical procedures to help train doctors on new and emerging techniques, according to the company.

The deal comes four months after Akamai bought micro-segmentation firm Guardicore for US$600 million to block the spread of malware more effectively within an enterprise, across the data center and cloud applications. The company bought Inverse for $17.1 million to better identify and secure IoT and mobile devices such as internet-enabled HVAC, lighting systems, medical equipment, robotics, and printers.

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