Akamai shares drop on report that it's losing Netflix

Both companies deny Akamai's streaming network is performing poorly

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Internet content delivery vendor Akamai Technologies is denying a report that it's losing Netflix as a customer, but Wall Street doesn't appear to be convinced, even though Netflix also disputes the report.

Shares of Akamai (NASDAQ: AKAM) closed Tuesday down 2.58, or 4.8 percent, to 51.56 after falling as low as 50.82 early in the day.

The catalyst for the price drop was a report Tuesday morning on the investing website Seeking Alpha. Dan Rayburn writes:

At the beginning of this year, Akamai took the Netflix business away from Level 3 and became the primary CDN (content delivery network) for Netflix, with at least 51% of their traffic. While it was a big win for Akamai at the time, it appears that it was short lived. Due to poor performance issues that Netflix has experienced with the Akamai network, Netflix now plans to move all of their traffic off Akamai in the coming months and will go back to only using Level 3 and Limelight.

This prompted a response from Akamai spokesman Jeff Young, who told Bloomberg, “We have a multiyear relationship with Netflix, and we will continue to have a multiyear relationship with Netflix.” Young also called "simply untrue" the poor performance allegation.

Meanwhile, the Wall Street Journal quotes a Netflix spokesman as saying, "We are satisfied with Akamai's performance, the reports of performance issues are not accurate, and we'll continue to engage Akamai as part of our multivendor strategy."

And just to make things even less clear, Rayburn, an analyst at market research firm Frost & Sullivan and an EVP at StreamingMedia.com, updated his post to emphasize that he was "talking about Netflix’s current streaming business and 'not about any potential business Akamai may have with Netflix outside of video streaming,'” Bloomberg reported.

Who knows what's really going on or how this will play out going forward. It's hard to take what companies say at face value, but Netflix and Akamai seem pretty adamant.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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