Akamai Technologies on Feb. 5 announced its plans to acquire former rival Netli for 3.2 million shares of its stock.
Akamai, which signed a definitive agreement with Netli that it expects will close in March, plans to exploit Netlis high-performance protocol for optimizing TCP and HTTP traffic to boost the performance of Web applications, the company said.
Privately held Netli, which was backed by $47 million in venture funding, also provides a managed service for accelerating Web applications and content through an overlay network on the Internet.
Click here to read about Akamais suite of services designed to address the nature of Web 2.0 rich media content.
But despite Netlis much smaller network, Akamai saw significant value in Netlis patented technology and saw an opportunity to combine that technology with the scale of the Akamai content distribution network for a better offering, according to Paul Sagan, president and CEO of Akamai, in Cambridge, Mass.
"Their protocol is focused on optimizing traffic between the end user and wherever the application is hosted. We believed we could add their functionality to ours for an even better solution," Sagan said.
The market for application acceleration, which combines both application delivery controllers and WAN optimization controllers, is expected to reach $3.3 billion by 2010, according to market research firm Gartner. Although the lions share of that market is in direct sales of appliances, Akamai said it believes acceleration as a managed service is a better model.
"We were very pleased with the results in the performance services space on our own last year. We are even more optimistic about the combined opportunity going forward," Sagan said. He attributed the strong growth Akamai saw last year to "the proliferation of broadband and the movement of business functions online."
It was not clear whether Gary Messiana, CEO of Netli, will stay on with Akamai after the acquisition has closed, but Sagan said Akamai is "very interested in retaining the talent at Netli."
The transaction is strictly for Akamai stock, and no specific value was placed on the deal. Akamai stock closed Feb. 5 at $58.18 per share, making the deal worth about $186 million.
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