Monday, October 8, 2007

CDO's and CDN's

Remember how the market cratered and the financials collapsed when the collateralized debt obligations couldn't be marked to market? All you had to do was short (then cover) those stocks with CDO exposure. Wall Street loves lingo and now nobody cares about CDO's. That trade is over. It's now about CDN's. Take a look at Akami (AKAM 33.92) and Limelight Networks (LLNW 11.60). And this time, to make money, you just have to buy the CDN companies.

CDN stands for Content Delivery Network, and it simply optimizes your speed on the 'net, when you're moving big bunches of data. Web caches store the most popular "stuff" and when web traffic hits one of the switches it goes directly to the "stuff" on the server attached to the switch. That gives you your "stuff" faster, and companies pay for it. It's analogous to taking the freeway to your friend's house when you're late for a hot date, when the drive through town is shorter, but covered with traffic lights. You just want to get there fast. It's the same with data, but now we're not talking about the most popular videos on YouTube. We're talking business. Telecommuters remote wireless web applications, can be handled quicker and more efficiently, and the procrastinators can meet their deadlines. Today, AKAM unveiled their IP Application Accelerator, and the stock moved up two and change, and LLNW moved in sympathy.

Now look at AKAM's arguments. WAN optimization hardware? Fuggedaboutit. No client-side software is needed, no expensive hardware to maintain, and you have a global network. In the 15 second sound bite that Wall Street understands it will be spun as this: AKAM is doing to networking, what VMWare (VMW 95.09) is doing to storage. And that's the sound bite spin on Wall Street bytes.

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