NEW YORK (CNNfn) - Akamai Technologies Inc. on Monday said it has signed a deal to buy InterVu Inc., in a stock swap valued at roughly $2.8 billion.|
Akamai, which provides services aimed at improving the speed and reliability of Web sites, said it would issue roughly 9.3 million common shares in exchange for all 15.1 million outstanding shares of InterVu.
Based on Friday's closing price of 117, the deal puts a value of roughly† $140 per share on InterVu's stock, reflecting a 20 percent premium.
Executives at Akamai (AKAM: Research, Estimates), which is headquartered in Cambridge, Mass., said the deal would help them to broaden their services.
Akamai's clients include General Motors, NBC and Paramount Digital Entertainment.
InterVu (ITVU: Research, Estimates), which has its headquarters in San Diego, also offers services that speed the delivery of Web content, but focuses entirely on streaming audio and video.
"It's clear to us that streaming media may be a faster growing business than content delivery," Paul Sagan, Akamai's president and chief operating officer said in a press briefing Monday. "Unlike Akamai, InterVu has been exclusively focused on IP streaming audio and video."
In November, Time Warner Inc.'s CNN News Group acquired a minority stake in InterVu, receiving $20 million in stock in exchange for on-air and online advertising and promotional time on CNN, CNN.com and other CNN media.
Both Akamai and InterVu use a network of servers and software that act as a "traffic cop" for Internet content, directing the data through the most optimal routes.
Shares of InterVu were up 9 at 126 in afternoon Nasdaq trade, 7.7 percent higher than their opening price. Akamai, meanwhile, slipped 8-5/8, trading 3.7 percent lower at 226-3/8.
"I don't think you can plausibly take a single message from the stock price activity after the merger announcement, said Scott Reamer, an analyst who tracks InterVu for SG Cowen Securities.
"It's clearly a sensible transaction just from the fundamentals. But as an analyst covering InterVu, I believed in the company so strongly that I personally am slightly disappointed that they sold out so early," Reamer added.
†"I believe they could have gotten a slightly better value had they held out another year, because I believe so strongly in the space in which they operate," Reamer said. "The buyout from Akamai reinforces that."
Akamai, which went public in October, last month closed its $200 million purchase of privately held Network 24 Communications, a Cupertino, Calif.-based company that specializes in technology that allows companies to conduct Internet broadcasts.
"We see this as a positive for Akamai, as it reaffirms the company's seriousness concerning capitalizing on its early lead in the data, content and media distribution market while accelerating its business plan," said J.P. Morgan analyst Mark Langner, who maintains a "buy" rating on Akamai.
"This is a strategic combination for the company, and I would recommend that investors look at it the same way," Langner said. "This is a stock that presents opportunities to buy on a regular basis because of the volatility. We've got a price target of 270, and we think the this is going to be a very important company long-term."
Both the Network 24 and the InterVu deals were part of the company's strategic focus on the burgeoning market for streaming audio and video on the Internet, according to Sagan.
"IP streaming is not an option for Akamai, it's a mandate," he said.
Although he did not provide a specific forecast, Sagan said that taking InterVu into the Akamai fold will increase costs, but at the same time boost its revenue.
As for the deal's impact on earnings, "We'll leave the Street's guidance in place and not comment any further on that," Sagan said.
Last month, Akamai reported a fourth-quarter operating loss of 40 cents per share, on revenue of $2.7 million. Analysts polled by earnings tracker First Call expect the company to lose 40 cents per share during the first quarter of 2000 as well.
When it posts fourth-quarter financial results later this week, analysts are expecting InterVu to record an operating loss of 66 cents per share.