I've made the point in a few recent articles that Wall Street and many industry observers are overestimating the threat that Level 3 and Limelight pose to Akamai (AKAM), just as they overestimated Cisco, AOL, and Inktomi's threats to the company then years ago.
CDNs require large support organizations dedicated to the service, which makes it challenging to simply bundle them with bandwidth. This is why after all these years, Verizon is still reselling Akamai, not competing against it, and why the top two providers of this now decade+ old service are not telcos. Moreover, in Akamai's case, its bandwidth costs are just 16% of revenue, compared to 33% for Limelight (LLNW), a figure that is not declining significantly.
Insiders at Akamai have endorsed this view, and bought over 87,950 shares since the post-earnings call sell-off. The biggest purchase came last Wednesday from Director Peter Kight, who bought 47,950 shares at $41.70, CEO Paul Sagan bought 15,000 shares a week ago Wednesday, and Director David Kenny bought 25,000 shares at $38.78 on August 4th.
While AKAM is not cheap, the market continues to overestimate its competitors' strength, and the insiders are buying on the dips.