Akamai Technologies, Inc. AKAM recently acquired recursive Domain Name System (DNS) provider Xerocole. The financial terms of the deal were kept under wraps. However, Akamai stated that the acquisition is not likely to impact its financial results.
UK–based Xerocole is a five-year old startup specializing in developing smart DNS platforms to enable Internet service providers to enhance their offerings. DNS technology converts human-readable domain names to IP addresses and is therefore crucial for a speedy network.
Synergies for Akamai
Though Xerocole will not be directly contributing to Akamai’s revenues, we believe that there are significant synergies for the latter.
Akamai has always focused on improving website and application performance in order to meet challenges like data center outages and distributed denial of service (DDoS) attacks. The company had been using its cloud-based ‘Fast DNS’ solution to meet the requirements.
The acquisition of Xerocole will boost its existing DNS services. Xerocole has a skilled workforce and it has developed an intelligent DNS platform that can support both Internet Protocol version 6 (IPv6) and Domain Name System Security Extensions (DNSSEC). IPv6 renders easy programming abilities that allow network providers to steer clear of the expensive redesigning of their sites. These capabilities allow the service provider to easily scale up their services while ensuring the security.
The recursive DNS technology has been designed keeping in mind the requirements for security, speed and hassle-free yet flexible DNS policy. Furthermore, the smart DNS technology also allows the carriers to capitalize on domain errors by offering personalized services based on subscriber preference thereby adding to the revenue stream.
Additionally, Akamai will also benefit from Xerocole’s partnership with Yahoo! Inc. YHOO, Namespace, Symantec Corp. SYMC, Damballa, SECURIFI and especially Lastline, a software platform for detecting security breaches.
In Conclusion
We believe that this acquisition can significantly enhance Akamai’s core businesses especially its content delivery network (CDN) offerings. In the past also, the company has made strategic acquisitions that added value to its business. A robust financial position allows Akamai to leverage such opportunities.
Such initiatives position the company well to benefit from the rising demand for cloud infrastructure solutions, security, mobile products and online video amid competition from the likes of Limelight Networks, Inc. LLNW.
Despite this encouraging news on Mar 2, investor sentiments remained muted as reflected in a decline of about 1.8% in yesterday’s trading session.
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