Why Limelight Networks Got Squeezed, Then Recovered

Why Limelight Networks Got Squeezed, Then Recovered

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Limelight Networks initially fell by as much as 14% Thursday morning following the release of the content delivery network specialist's second-quarter earnings report Wednesday after the market closed. However, the stock gradually recovered nearly all of its losses as the day wore on.

So what: For the quarter, Limelight reported an adjusted loss of $0.07 per share, missing average estimates, which called for a loss of $0.05 per share. In addition, Limelight's revenue came in at $42.8 million, which also missed estimates for sales of $46.6 million.

However, while CEO Bob Lento admitted the results were "disappointing," he also pointed out they were the result of "changes we are making to implement our long-term mission of helping customers better engage digital audiences."

Now what:Nobody likes it when their company misses earnings expectations, but a miss is certainly made more palatable when it stands as a direct result of changes implemented to make the business better over the long run.

Lento went on to elaborate by saying they have "launched several initiatives bringing renewed discipline and speed to product development and network operations," and have also "established a clear process for identifying customers who value quality, performance, availability, and service, while moving away from contracts that do not provide long-term economic value."

Considering the company boasts no debt with cash and equivalents of $119 million-- or more than half their total $206.7 million market capitalization -- I think investors are right to overlook these temporarily weak results in favor of building long-term strength.

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The article Why Limelight Networks Got Squeezed, Then Recovered originally appeared on Fool.com.

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