Akamai, Limelight shares break out of their slump

Shares of Limelight Networks, which handles video distribution chores for MSNBC, DreamWorks, Microsoft and others, suddenly shot up more than 21% in late afternoon trading after trading flat through the morning. The shares closed at $11.60, up $2.05 on the day on more than double its average volume.

Although the move had all the earmarks of company about to make news a spokeswoman for Limelight told Content Agenda there was nothing to announce.

Shares of Limelight's keenest rival, Akamai, also jumped on, closing up 8.4% on the day at $33.92. Akamai handles video distribution for MySpace, Fox Interactive, Clear Channel, CBC and others.

In Akamai's case, there at least was some news behind the move: the announcement of a new service to accelerate enterprise applications over IP, although the size of share price move was greater than any near-term impact the new service is likely to have on earnings.

"I think [investors] are looking for a way to get into the CDN business," Jeffries & Co., analyst Katherine Egbert said. "Akamai had some news and Limelight seemed to follow it up. Maybe people got excited."

Shares of both companies have lagged the market recently as investors feared growing price competition in the CDN market, particularly since Level-3 Communications stepped in earlier this year and began undercutting both Akamai and Limelight.

Limelight shares also suffered a meltdown in August after the company said third-quarter earnings would be lower than expected.

Akamai and Limelight are also locked in expensive litigation, stemming from a patent infringement action filed by Akamai against Limelight.

That case is expected to go to trial sometime next year.