What Exactly Is Its CDN Strategy?

Apple

Apple  is a major customer for numerous companies, and losing its business could be disastrous for some. Take, for example, Akamai Technologies, which declined more than 3% on Monday after reports that Apple may one day stop being a customer. The company is scheduled to release its next earnings report on Wednesday.

How Apple affects Akamai

Akamai Technologies  provides Apple ’s content delivery network (CDN), helping boost Apple’s bandwidth for things like iTunes and software downloads. In other words, if Apple builds its own CDN, it might not have use for Akamai’s network any longer. After all, Netflix,  once relied on Akamai for its content delivery needs, but the company no is now able to deliver approximately 70% of its content in the U.S., according to network researchers from DeepField. The result was lower costs in content delivery—a goal Apple could be aiming for as well.

However, Barron’s reports that analyst Gray Powell of Wells Fargo came to Akamai Technologies ’s defense, saying that we simply don’t know enough about Apple’s CDN strategy. He called the risk to Akamai “fairly minimal” and says that if it does have an impact, it won’t be any time soon. Atlantic ACM VP Aaron Blazar also noted that this process of shifting away from Akami could take “several years.

Powell notes that recently the two companies negotiated a three-year contract, and Akamai Technologies  does see a reduction in revenue from Apple in the near term. However, he said even if Apple  does move all of its CDN traffic away from Akamai, the full impact of this wouldn’t happen until 2015, and even then, he said the impact would be relatively small.” 

Apple works behind the scenes to build a CDN

The decline in shares of Akamai Technologies  came after The Wall Street Journal reported on Monday that Apple  has been quietly building its own Internet infrastructure, or CDN. The report indicates that Apple may want more control over how its online offerings are distributed and the quality of those offerings while also preparing for even more traffic. And if Apple is planning to see even more traffic, then it could be preparing for a move even further into television, just as analysts have been saying for years. In fact, experts say that the company’s recent moves mimic those of Netflix, which abandoned Akamai.

Apple  has found itself in need of more and more online delivery over the last several years as its iCloud and iTunes see more and more usage. The App Store also adds to the company’s needs in this area, but if it is indeed planning to launch an iTV, as so many analysts expect, then its needs will increase even further.// Valuewalk