Akamai Technologies Inc. is expecting a high-definition revolution.
But the lingering questions are where and when.
Akamai (Nasdaq: AKAM), a Cambridge-based content delivery network (CDN) company, has recently begun touting what it's calling a unique network "specifically tuned" for the quick delivery of HD videos online.
It's an impressive claim for a company whose stock in recent months has taken a beating. It's also very early.
Most experts believe heavy proliferation of HD content, despite television companies' push to get more sets in homes, is a long way off. "There's almost no demand for HD content today (online)," said Dan Rayburn, executive vice president of StreamingMedia.com, an Internet publication that follows the CDN industry.
Akamai, however, gave a number of reasons it believes the market is gravitating toward HD. First, more people are beginning to use broadband Internet connections, which are capable of handling big files like HD video. Secondly, content producers are starting to work more in HD and passing it along to viewers. That's inspired many users to begin buying higher-quality computer screens to enjoy downloading such videos.
All of that taken together is creating a "perfect storm," said Tim Napoleon, product line director for media and entertainment at Akamai. "That's why Akamai is very bullish on the technology," he said.
There could be another reason for Akamai's bullish feeling.
The CDN market is getting increasingly crowded for Akamai, which has always been a leader in the industry. Many of those competitors -- including its main West Coast rival, LimeLight Networks Inc. (Nasdaq: LLNW), which Akamai has sued for patent infringement -- claim their more centralized model of putting higher-capacity servers in fewer locations makes it possible to offer services at a lower cost than Akamai, which has always taken the approach of placing lower-capacity servers in more locations.
Akamai said it has 25,000 servers in 1,100 networks in 750 locations. But there's a high cost associated with maintaining those servers, and Akamai's depreciation expenses increased in the last quarter, according to a quarterly report filed by the company in August. Since the company anticipates future purchases of network equipment it expects depreciation expenses to increase on a quarterly basis for the rest of 2007.
Still, Akamai said its widely distributed network is a major component of what makes it specially designed to deliver HD content. Pushing large files through the Internet -- and HD video are particularly large files -- gets tougher the further the end-user is from the actual server, Napoleon said.
"As you move farther and farther away from your audience with these end files your speed gets slower and slower," he said. "It's just the way the physics of the Internet work."
According to Akamai, its network would be better positioned than competitors to handle the demands of clients when the HD movement arrives. "There's not a whole lot of HD content out there so this is preparatory," said Lydia Leong, a research director at Stamford, Conn.-based research company Gartner Inc. (NYSE: IT). "It's also a way to generate some buzz."
Indeed, given how early it is in the growth of HD content, Akamai's talk might be aimed at maintaining a front-and-center position in the market. "I think if anything that's just (Akamai) wanting to say to the market that were thought leaders," Rayburn said.
It comes at a particularly tough time for the CDN industry.
Akamai's stock has dropped from a high of around $56 back in February to around $30 per share this week. LimeLight, which was trading around $24 after its initial public offering in June, was hovering around $9 per share earlier this week. Redwood, Calif.-based BigBand Networks Inc. (Nasdaq: BBND), which sells video networking platforms, has seen its stock drop from around $20 in April to about $9 a share this past week.
Jesse Noyes can be reached at jnoyes@bizjournals.com