Akamai Technologies, Inc. (AKAM)

[eastunder]

Akamai Q2 EPS Outlook Lags, Shares Down After Hours

By REINHARDT KRAUSE, INVESTOR'S BUSINESS DAILY Posted 06:39 PM ET

http://news.investors.com/article/609174/201204251839/akamai-q2-guidance-disappoints.htm?ven=yahoocp,yahoo

Akamai Technologies (AKAM) late Wednesday reported first-quarter results that solidly beat views, but its earnings outlook for the current quarter lagged and shares fell late.

The company also said that 14-year company veteran Paul Sagan, CEO since 2005, would step down by the end of 2013.

Cambridge, Mass.-based Akamai said Q1 profit rose nearly 8% to 41 cents per share on revenue of $319 million, up 16%, as surging online video consumption drove its content delivery network (CDN) services.

Analysts polled by Thomson Reuters had estimated Akamai would earn 38 cents a share on sales of $310.7 million. Akamai said Cotendo, which it acquired on March 6, accounted for less than $2 million in sales in the March quarter.

But the company said it expects EPS of 37 cents, up 6%, on sales of about $326 million, up 18%, in Q2. Analysts had been modeling revenue of just $314.8 million, but were expecting EPS of 39 cents.

Shares were down about 5% after hours, after the company released its results. Still, the stock is up more than 90% since Oct. 1 and is up 18% in 2012.

"Akamai (fell) due to their margin guidance," said Donna Jaegers, an analyst at D.A. Davidson & Co.

She also said Akamai "is typically cautious on margin guidance."

Piper Jaffray analyst Michael Olsen agreed EPS guidance was below expectations, but he said "it sounds like it is largely related to acquisition dilution near term."

Akamai said Q1 net income fell 15% to $43 million because of costs related to its acquisitions of Cotendo and Blaze Software. Acquiring Cotendo gave Akamai new corporate partners in Citrix Systems (CTXS) and Juniper Networks (JNPR), analysts say.

Akamai's global network of computer servers speed up the delivery of video and Web content for media and entertainment firms and other customers. The company stores copies of website content in its facilities worldwide to speed delivery by bypassing traffic jams on heavily used Internet routes.

Akamai paid $268 million for Israel-based Cotendo, whose technology whisks content over fixed-line broadband and wireless data networks. Analysts have estimated Cotendo's 2012 revenue in a range of $40 million to $45 million. Cotendo customers include Facebook, Zynga (ZNGA) and Google (GOOG).

Akamai gets 43% of revenue from media and entertainment firms like sports network ESPN and online movie renter Netflix (NFLX). Media-related sales in Q1 rose 14%, Akamai said.

Analysts estimate that prices for video delivery will fall 20% to 25% in 2012 as Akamai battles Limelight Networks (LLNW), Level 3 Communications (LVLT) and others.