Apple's in-house CDN efforts spell trouble for Akamai as infrastructure biz warns of losses

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Seminal internet infrastructure provider Akamai has cautioned investors that traffic from its two biggest clients -- Apple and Microsoft -- will decline in the year ahead, thanks to what chief executive Tom Leighton called their "DIY efforts."


Apple's data center in Maiden, N.C.


"Over the last two years, our two largest customers...comprise about 13% of Akamai's overall revenue," Leighton said during the company's quarterly earnings call. "As we look ahead to 2016, we expect these two accounts to still be our largest media customers, and they will contribute about 6% of our overall revenue."

"This seven point change in contribution results from their increased do-it-yourself, or DIY efforts," Leighton added.

Apple and Microsoft have topped Akamai's customer list for years, and their declining patronage could spell trouble for the firm. Akamai is already facing intense competition from the likes of Amazon, and has started to branch out into information security and other related areas in a bid for stability.

Apple's in-house content delivery efforts have been in the works since at least 2013, and the company began to offload some traffic onto its own CDN in July 2014. Akamai is thought to have been left with the legacy iTunes infrastructure, though it's not clear how or if that mix has shifted following the launch of Apple Music.

As part of a multi-billion dollar investment in cloud infrastructure -- including several massive datacenters around the world -- Apple is believed to have spent more than $100 million on the CDN alone. That likely includes software development costs and cage space in existing datacenters, as well as paid interconnection agreements with internet service providers.

Comments

  • Reply 1 of 9
    ksecksec Posts: 1,551member
    Um... so the likely scenario is because Apple had a deal with Akamai for some time before they can switch. 

    I don't think Microsoft contribute as much to Akamai as Apple. So that 7 point changes attribute Apple will significantly reduce its reliance on Akamai in two years time.


  • Reply 2 of 9
    volcanvolcan Posts: 1,770member

    As part of a multi-billion dollar investment in cloud infrastructure -- including several massive datacenters around the world -- Apple is believed to have spent more than $100 million on the CDN alone. 
    In other words pocket change.
    cornchip
  • Reply 3 of 9
    Wonder if Cook considered buying Akamai? Might cost a little more but they already have the infrastructure in place.
  • Reply 4 of 9
    maestro64maestro64 Posts: 4,476member
    ksec said:
    Um... so the likely scenario is because Apple had a deal with Akamai for some time before they can switch. 

    I don't think Microsoft contribute as much to Akamai as Apple. So that 7 point changes attribute Apple will significantly reduce its reliance on Akamai in two years time.



    it did not sound like it was a complete move away, Mostly likely Apple will keep them around as a backup system. Apple will spread the risk, hopefully Apple would not risk it all on just them doing it right. We also know that Apple was using Amazon as well.
  • Reply 5 of 9
    And, Akamai's stock is up 25%.  On the news there two biggest customers are actively leaving their service

    You can't make this stuff up  
    quadra 610latifbp
  • Reply 6 of 9
    brucemcbrucemc Posts: 1,519member
    rgmenke said:
    Wonder if Cook considered buying Akamai? Might cost a little more but they already have the infrastructure in place.
    Not if he is smart.  And I think he is.  Why pay the premium of buying a public company, with legacy / aging equipment, who's value comes from it selling services to thousands of enterprise customers?  Apple isn't in that business. 

    To serve their own content, it is far more efficient to expand with native equipment.
    chaickalolliver
  • Reply 7 of 9
    I remember Apple invested heavily in Akamai and recall him mentioning as such during a keynote presentation where he was talking about Quicktime Tv
  • Reply 8 of 9
    Him being Steve Jobs. Btw, this new interface for AI is horrible on mobile for editing
  • Reply 9 of 9
    rgmenke said:
    Wonder if Cook considered buying Akamai? Might cost a little more but they already have the infrastructure in place.
    Having Apple host competitors' data might not be all that cool. It would certainly be scrutinized, and probably criticized. Would the upside be worth it? Maybe but it's risky.
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