Akamai Shares Swing on Google Takeover Rumors, Fair Value at $31

Akamai’s stock were up as much as 17% in after hours trading fueled by rumors that Google (NASDAQ:GOOG) is planning to acquire the company. Reports later came out that the rumors were baseless. ^[1] By the end of the day, the stock had pared most of its gains to close at $23.37, about 25% lower than our $31 price estimate.

This is not the first time Akamai has been the target of such speculations. Earlier in the month, it was rumored that Akamai may be acquired by companies like IBM (NYSE:IBM) or Verizon (NYSE:VZ). ^[2]

Sustained pricing pressures from competitors like Limelight Networks (NASDAQ:LLNW), InterNAP Network Services (NASDAQ:INAP) and Level 3 (NASDAQ:LVLT) for its content delivery network (CDN) service has forced Akamai to continually revise its earnings outlook downward over the last few quarters. This has resulted in a steep fall of more than 50% in its market value over the last year. At these levels, it could make it a very attractive to a potential buyout candidate. and should that happen, we believe that fair value is close to $31. (see Akamai’s Fair Value Close to $31 if Acquired)

See our complete analysis for Akamai stock here

Understand How a Company’s Products Impact its Stock Price at Trefis

1. Google said No to Plan Acquisition of Akamai After Shares rise on Report, Bloomberg quoting two people familiar with the matter, October 13th, 2011 [↩]
2. Akamai Down 57% Lets IBM Vie With Verizon for Takeover: Real M&A, Bloomberg, October 6th, 2011 [↩]