Thursday, September 30, 2010

Limelight on Fast Money

Tonight on CNBC's Fast Money, Jim Cramer welcomed the CEO of Limelight Networks (LLNW), Jim Lundsford, as his featured guest.

After hearing about the company only yesterday (apparently), Cramer introduced Limelight as a way to capitalize on what he calls "The Mobile Tsunami".  Limelight operates a private network that companies use to stream video and deliver content faster.

I agree with Cramer that internet mobility is a huge trend, but finding winners may be difficult.  The following exchange from the interview was shall I say... enlightening?

Cramer: It’s difficult for me to understand how competitive this market is until I look at the revenues... 2008 and 2009 were flat.
Lundsford: Right.
Cramer: Now is that because of price competition with other companies?

Lundsford:  There has been… in 2009 particular, you saw our growth flatten on the revenue line, but our traffic continued to grow, Jim.  So our traffic has grown 129% a year for the last 5 years… and it continues to grow.

Close call, eh, Mr. Lundsford?  Too bad Cramer didn't ask about earnings.  Bullet dodged.

I'm not sure about you, but drawing my attention away from revenue towards traffic growth gave me a tinge of nostalgia. Remember the old days of when people cared more about clicks and eyeballs than they did about sales or profits?  Such arcane concepts. 

I bet Limelight has some nifty pro-forma projections in its annual report too.  Yup, those were the good old days!

Limelight may become the next big thing in tech.  After all, according to the CNBC website, the company "held its first ever analyst day earlier this month and announced it would take its proprietary network one step further by offering cloud-computing and mobile services."

Did you say "CLOUD-COMPUTING"?  That's even better than having ".com" in your name!

Please watch the video entitled "In the Limelight?"

My favorite part is when Lundsford likens the internet to the US Postal Service and Limelight to FedEx.  I won't waste space pointing out why this is a strained analogy at best.  Nonetheless, it is one he seems to like.  Lundsford also seems to think that LLNW and Akamai (AKAM) will become an industry duopoly like FedEx (FDX) and UPS.

More like David and Goliath.

Akamai's annual profits exceed Limelight's revenue, so I'd say our friend is suffering from delusions of grandeur.  But then again, that's not hard if you don't focus on things like revenue and profits.

You see, it's traffic growth that matters!

This is one Limelight I'll avoid.


Disclosure:  No positions.

3 comments:

  1. Right. You're making perfect sense. Tewnty years ago, we should have only invested in UPS because they were 'Goliath' and ignored FedEx as David. Investing in both would have been foolish since only one of those companies is now successful and profitable. Because we all know, there's only one winner in any market. That's why Microsoft Windows is kicking Apple's ass. Oh, wait...

    ReplyDelete
  2. I think the author's point was that the FedEx vs. UPS analogy was not a good analogy in this situation. Lunsford used the analogy as if his business was FedEx going against the USPS as if the USPS was the entire internet and that is what LLNW is going against. This is untrue. LLNW simply would be routing packages (in this case packets) through the internet via best route possible. That is now what FedEx did. They didn't route packages through the USPS. They bypassed it all together.

    Looking at LLNW's financials, I see a lot of red going back through 2009. That is what makes me nervous.

    ReplyDelete
  3. Somebody missed the ENTIRE point of what I was saying. And someone else got it. Both Anonymous... go figure.

    My beef with LLNW is not their relative size.

    Try reading the article again.

    ReplyDelete