Limelight Networks' (NAS: LLNW) shares plunged 37% in a single day after the company reported higher losses, hurt by a surge in costs, and forecast a weak third quarter.
Although Limelight's disappointing results and lower-than-expected third-quarter revenue forecast weighed on its shares, its performance was more or less in line with a growing trend in the content delivery network services industry. Peer Akamai Technologies (NAS: AKAM) lowered its revenue outlook for the year as a result of a feeble European market. Level 3 Communications (NAS: LVLT) recently saw its revenues rise 2.6%, but the figure was well below Street estimates.
Here's what you need to know about Limelight's quarter.
A look at the numbers
Revenues for the quarter increased to $50.5 million from $42.2 million, up 20% on a year-on-year basis. Revenues fell below analyst estimates as a result of lower campaign volume on its EyeWonder rich media advertising platform and a fall in content delivery network traffic for its two largest customers. It is looking to bring in new products in its rich media business by next year to help boost revenue growth, so this trend may continue for sometime yet.
Operating expenses rose 11% to $32.4 million from $29.2 million. This was in part due to a 39% increase in selling general and administrative expenses, as well as an 81% surge in research and development-related costs. This resulted in the quarterly loss zooming to $13.9 million, compared with a loss of $2.3 million last year.
The Foolish bottom line
Limelight has suffered a string of losses recently, and it needs to somehow reverse this trend. Recently, Dan Rayburn speculated that Goldman Sachs (NYS: GS) , which is Limelight's largest shareholder, was planning to put Limelight up for sale, with Verizon (NYS: VZ) , AT&T (NYS: T) and Microsoft (NAS: MSFT) as potential acquirers. For the time being, things don't look good for the Tempe-based company.
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At the time thisarticle was published Shubh Datta doesn't own any shares in the companies mentioned above.The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of AT&T and Microsoft, as well as creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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