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Netflix Says It’s Satisfied With Akamai’s Performance

Netflix Inc. said it is satisfied with the performance of network services provider Akamai Technologies Inc., refuting a report it may terminate its relationship with the company.

Akamai, the largest supplier of software to make websites and digital media load faster, continues to provide service, Steve Swasey, a spokesman for Netflix, said in an e-mail.

“We are and continue to be satisfied with their service,” Swasey said.

Netflix may end its video-streaming relationship with Akamai soon “due to performances issues,” Dan Rayburn, an analyst at Frost & Sullivan, a market research firm, said in a post today on financial blog Seeking Alpha.

Akamai fell $2.58, or 4.8 percent, to $51.56 as of 4 p.m. New York time in Nasdaq Stock Market trading. The shares dropped as much as 6.1 percent earlier, the biggest decline since Oct. 6. Netflix rose $1.33 to $170.46.

Akamai expects to remain a vendor to Netflix “well into next year and beyond,” said Jeff Young, a spokesman for the Cambridge, Massachusetts-based company. “We have a multiyear relationship with Netflix, and we will continue to have a multiyear relationship with Netflix.” He said allegations of poor performance are “simply untrue.”

‘A Black Eye’

The loss would be significant because of Netflix’s brand name and leading position in the fast-growing video-streaming market, where Akamai aims to expand its business, said analyst Colin Sebastian at Lazard Capital Management in San Francisco.

“If Akamai were to lose Netflix in streaming, that would be a black eye for them,” said Sebastian, who has a “hold” rating on Akamai and doesn’t own shares of the stock.

Netflix’s video-streaming fees contribute about $10 million to $15 million a year to Akamai’s revenue, Rayburn said in an interview. That amounts to less than 1.7 percent of Akamai’s 2009 sales of $860 million, according to data compiled by Bloomberg.

In addition to video streaming, Akamai makes software to help Web publishers with tasks like processing transactions and loading mobile applications.

Netflix’s Swasey declined to comment on whether the Los Gatos, California-based company is shifting more business to Akamai competitors Level 3 Communications Inc. and Limelight Networks Inc. Bloomfield, Colorado-based Level 3 confirmed it has a services deal with Netflix, CNBC reported.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net Douglas MacMillan in San Francisco at Dmacmillan3@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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