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Internet software makers Akamai Technologies Inc. and Speedera Networks Inc. are ending a bitter three-year legal fight by merging. Cambridge, Mass.-based Akamai said Wednesday it would acquire its rival in an all-stock deal valued at $130 million. The buyer, which helps companies route traffic over the Internet, will issue roughly 12 million shares of common stock for Speedera, a Santa Clara, Calif., provider of Web services that allow customers to outsource their bandwidth, processing and storage needs. According to a statement from the companies, Akamai and Speedera will drop the litigation pending completion of the deal. Akamai filed suit against Speedera in 2002 in Massachusetts federal court for allegedly infringing a patent on Web content delivery technology, among other charges. That drew a counterclaim from Speedera, which alleged that Akamai had infringed a patent it held relating to Internet traffic management and content delivery. Those cases were scheduled to be heard in October. Also that year, Akamai filed suit against Speedera in California Superior Court alleging theft of trade secrets from Keynote Systems Inc., a provider of Web site performance testing services. Akamai alleged that Speedera used that information, which Keystone was authorized to have, to learn which companies Akamai was soliciting for business. In response, Speedera filed a cross-claim against Akamai charging that it engaged in unfair trade practices and competition and that it had made false and misleading statements. A hearing on those claims was set for today, with trial slated for April. Akamai representatives did not return calls seeking comment. During a conference call to discuss the acquisition, Akamai CEO Paul Sagan did detail why his company opted to drop its case. “I would think it’s better to settle business differences as a business matter, not in the courts, and I’m glad we were able to do it in a way that was positive,” he said. “Court battles can be long and drawn out, and a lot of damage could have been done in the business in the meantime.” But some company observers expressed surprise at Akamai’s move. Maria Lewis Kussmaul, director of investment research at Americas Growth Capital in Boston, said that Akamai’s case was viewed as “very strong.” “I do think at the end of the day the outcome is favorable to Akamai, but I’m frustrated because there must be more to the story,” she said. “Here you have acrimonious competitors engaged in bi-coastal litigation for years, and they kiss and make up in a 5-times revenue deal on the eve of the trial. That’s what I find curious.” Kussmaul theorized that another potential acquirer may have taken interest in Speedera, prompting Akamai to make a play. But Jean Orr, a research analyst with Fairfield, Conn.-based Nutmeg Securities Ltd., was less skeptical about Akamai’s motives. “It looked like Akamai had a good chance to win the litigation,” she said, “but it would take a long time to get that resolved, it would be expensive, and in this case joining forces is better than fighting.” Privately held Speedera, which says it is profitable, had revenue of $8.3 million in the fourth quarter of 2004. Kussmaul estimated the company’s 12-month trailing revenue at $25 million to $27 million. Among its customers are DoubleClick Inc., Fox Broadcasting Co., Macromedia Inc., the National Aeronautics and Space Administration, McAfee Inc. and Univision Communications Inc. Speedera has raised more than $36 million in venture funding since 2000. In 2002 it announced a $6.5 million round led by Menlo Park, Calif.-based Trinity Ventures. Trinity also participated in a $20 million round in 2001 that included Continuum Group Ltd., Banc of America Securities LLC, Balanced Growth Fund, Comdisco Inc., Deutsche Bank AG, Hewlett-Packard Co., Industry Ventures and Oracle Corp. Comdisco Ventures also invested $10 million in Speedera in 2000. Akamai’s deal for Speedera is the latest case of a technology company resolving an intellectual property dispute through acquisition. In December, for example, chip design software maker Synopsys Inc. paid $192 million to acquire rival Nassda Corp., ending a patent and trade secret suit filed against Nassda. Copyright �2005 TDD, LLC. All rights reserved.

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