I don't currently own LVLT, but it would be nice if they can get healthy. It may be a long haul.
Netflix Signs Streaming, Storage Accord With Level 3
By Greg Bensinger
Bloomberg
Nov 11, 2010 8:38 AM CT
Netflix Inc., the mail-order and online movie-rental service, said it agreed to have Level 3 Communications Inc. provide video-streaming and storage services beginning next year. Level 3 shares surged.
Netflix, based in Los Gatos, California, will begin moving its 20,000 movie titles to Level 3’s storage this month, according to a statement today. Level 3 will provide streaming services starting Jan. 1.
“This win is likely to be meaningful to incremental revenue growth for the company, which Level 3 very much needs,” said Jennifer Fritzsche, a Wells Fargo & Co. analyst in Chicago. She estimates the agreement will be worth about 5 percent of Level 3’s revenue.
Netflix predicts its subscribers will increase to 19 million by year-end, according to the statement. It added 1.93 million subscribers in the third quarter to 16.9 million.
Level 3, based in Broomfield, Colorado, said it will double its storage capacity to help accommodate the new contract. The company’s shares rose 11 cents, or 11 percent, to $1.14 at 9:34 a.m. New York time in Nasdaq Stock Market trading.
Netflix said this week that it was “satisfied” with the video-streaming service provided by Akamai Technologies Inc. Dan Rayburn, a Frost & Sullivan analyst, said he expected Netflix to end its relationship with Akamai. Liz Bradley, a spokeswoman for Cambridge, Massachusetts-based Akamai, didn’t immediately return a call seeking comment.
Alexis Hammack, a Level 3 spokeswoman, said in an e-mail she didn’t have an immediate comment. Steve Swasey, a Netflix spokesman, didn’t immediately respond to an e-mail before regular business hours.
Netflix shares fell $1.01 to $175.68 and Akamai dropped $2.44, or 4.7 percent, to $49.41.
To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net
To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net
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