Akamai acquires Linode for $900m to address edge cloud applications like metaverse

Akamai acquires Linode for $900m to address edge cloud applications like metaverse

Akamai, the CDN and security services provider, has bought Linode, one of the last remaining sizeable independent hosting providers in the internet infrastructure market. Akamai said it wants to combined Linode’s “accessible” cloud platform with the Akamai platform to help build modern digital experiences, including virtual environments like the metaverse.

Linode CEO Christopher Aker, who founded the company in 2003 (not long after Akamai itself was founded) said “Customers face new challenges as cloud services become all-encompassing, including compute, storage, security and delivery from core to edge.”

“Solving those challenges requires tremendous integration and scale which Akamai and Linode plan to bring together under one roof,” he said in a prepared statement.

Linode has a following in the developer community, and came out with a shared compute and storage platform some time before AWS, enabling it to claim to be the creator of public cloud services. Despite the large (and for many other hosting providers lethal) competition from AWS and others, it has managed to survive and keep growing at a steady pace over the last twenty years, partly by undercutting the prices of its larger rivals.

The purchase will cost Akamai $900m and will add about $100mn to its revenues in 2022. Akamai reported annual 2021 revenue of over $3.5B.

Akamai seems to be in acquisition mode at the moment. It picked up a ransomware specialist in September 2021 called Guardicore for $600M. Guardicore has an annual run rate of $40M.

Meanwhile, Akamai says its Edge Application business is growing rapidly. It now has over $200mn in annual revenue run rate and grew over 30% in 2021.

Analysis

Akamai executives have been more focused in recent years on building the security services business through acquisitions, so the move to buy a cloud service provider is an interesting change of direction. A CSP acquisition is certainly not a huge surprise – CDN’s are essentially a form of on-demand hosting that happens to use highly distributed resources.

What Akamai is interested in is a large developer community and a pathway to a programmable edge platform that focuses more on a self-service model than Akamai has offered in the past. Akamai has been moderately successful in opening up its existing CDN and edge platform, which has made it easier for existing customers to link their applications with Akamai’s infrastructure.

Meanwhile, services like Cloudflare and Fastly have accelerated their business growth through a developer-first, self-service model for services. On the other side, AWS has captured a slice of the CDN market with Cloudfront, and is gunning for edge applications with services like AWS Local and the IoT-focused Greengrass.

It’s not clear how fast Akamai can accelerate Linode’s growth in 2022 by having the company under its arm. Figure on deep integration to take at least a year, and then we’ll see if the acquisition has helped Akamai open up its platform to new users and new applications.

Jim Davis, editor, EdgeIR.com

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