Limelight Slides; Price Pressures Weigh On CDN Market

Limelight Networks (LLNW) shares are coming under pressure this morning after Raymond James analyst Michael Tutits cut his rating on the stock to Underperform from Market Perform, citing growing price pressure in the content delivery network sector. Turits notes that Q2 results indicated worsening price pressure for both Limelight and rival Akamai (AKAM); he says Limelight is also seeing slower traffic growth.

Turits also repeated his Market Perform rating on AKAM; he cut estimates on both companies.

“Post-quarter checks indicate Limelight is seeing increasing price pressure both from above (from an increasingly price aggressive Akamai and continued pressure from carried CDN Level 3 (LVLT)) and from below (from smaller but increasingly capable venture-backed CDNs),” he writes.

Turits thinks Limelight will see 2010 revenues fall slightly from 2009 levels.  “We continue to view Limelight as providing top-tier CDN services for video and large file delivery,” he writes. “However, with Akamai now joining Level 3 and private CDNs in the race for price leadership, and with no refuge likely for Limelight in higher margin services, we see downside risk to both revenue and margins for Limelight for some time to come.”

LLNW today is down 20 cents, or 5.3%, to $3.55. AKAM is up 12 cents, or 0.7%, to $18.15.