Video Vanguards

Investing in the streaming video trend

down after the technology crash in 2001. Still, those clients who got in at the beginning haven’t done that badly. Oak Associates first bought Cisco for as low as eight cents a share; split adjusted it traded around $30 in early August.

Stimpson also likes Sunnyvale, California-based Juniper Networks Inc. (JNPR), which makes routers and other equipment that help improve the quality of streaming video. Last year an investigation found that the company improperly backdated employee stock options; it was forced to restate its financial records to the tune of $900 million. There’s also been some man agement reshuffling, with five top executives shown the door (CEO Scott Kriens remained). But the stock has more than doubled off a low closing price of $12.20 in August 2006 and traded around $31 a year later. Investors are waiting for Juniper’s next generation of routers due to hit the market later this year.

Other infrastructure bets include those companies that enable video content to be delivered smoothly. For example, when a television network posts a popular show online, these tech companies help handle the spike in Internet traffic by spreading out the volume over their network of servers. Jeff Rottinghaus, portfolio manager of the T. Rowe Price Global Technology fund (PRGTX), likes Limelight Networks Inc. (LLNW), a company based in Tempe, Arizona, that digitally delivers content for media companies in a wide range of industries, including television, radio, video games, and software. Fast-growing Limelight went public at $15 a share in June, and was up 18% by late July. But when the company announced disappointing earnings for its first quarter as a public company, the shares plummeted some 39% in one day to $8.99. But the sudden drop didn’t change Rottinghaus’ long-term outlook for Limelight as a good growth opportunity. “I think the stock will go much higher over the next year or two,” he says, noting that he thought the same when shares were trading at $17.

With a market cap of $636 million, Limelight Networks competes against much larger Akamai Technologies Inc. (AKAM), based in Cambridge, Massachusetts, the leader in digital delivery space with a market cap of $5.1 billion. Rottinghaus is betting on the continued expansive growth of the Internet around the globe and faster growth with the smaller Limelight. “When the demand comes, networks can use this service to download video faster.”

Also on the smaller scale, Stimpson likes F5 Networks Inc. (FFIV), a company with a market cap of $1.5 billion that focuses more on software that helps customers manage the performance and security of their “mission critical” Internet applications, such as online banking and stock trading. Its technologies also can be applied to video. The way information gets routed on the Internet can get very complicated, and F5 Networks should reap the rewards of the growth in video demand. “They are a natural beneficiary,” says Stimpson.

Network providers also stand to benefit from the battle between cable and telecommunications companies to offer downloads in the home. “It’s an arms race

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