Akamai adds cloud-computing platform with $900 million acquisition of Linode

Internet services and cybersecurity company Akamai Technologies announced Tuesday that it is acquiring cloud-hosting service Linode for $900 million.

Akamai, based in Cambridge, helps companies manage Internet traffic for online video games and streaming TV shows. It has also expanded in recent years into providing security services online, helping customers block hackers and automated bots. Adding Philadelphia-based Linode would provide a third type of service: hosting content for web sites and online applications.

Akamai said the acquisition should be completed by the end of the first quarter and would add about $100 million to its annual revenue.

The move continues chief executive Tom Leighton’s strategy to diversify beyond Akamai’s original content delivery business, which has been shrinking due to price competition from newer rivals.

“Today we are excited to begin a new chapter in our evolution by creating a unique cloud platform to build, run and secure applications from the cloud to the edge,” Leighton said in a statement, referencing Akamai’s incipient business in helping companies move software applications from cloud data centers to its network of servers around the world. “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.”

By acquiring Linode, Akamai will also get a tax benefit for the next 15 years that is worth $120 million.

Linode competes in cloud hosting against some of the largest tech companies, including Amazon’s AWS unit and Microsoft’s Azure service. Linode has focused on small- and medium-sized business customers and could benefit by combining with Akamai, which has a strong customer base among large companies.

The deal is the second major acquisition for Akamai in recent months. In September, the company bought Guardicore, an Israeli firm that fights ransomware attacks, for about $600 million.

Also on Tuesday, Akamai said its fourth-quarter revenue totaled $905 million, 7 percent higher than the same period a year ago and slightly better than analysts expected. Adjusted earnings per share of $1.49 were up 12 percent from a year ago and also slightly beat expectations.

Shares of Akamai, which have lost about 5 percent so far this year, declined another 5 percent in after-hours trading on Tuesday.

Aaron Pressman can be reached at [email protected]. Follow him on Twitter @ampressman.


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