Akamai Shares Fall After Second-Quarter Revenue Forecast Misses Estimates
(I think this one is better?)
By Danielle Kucera - Apr 27, 2011 3:16 PM MT
Akamai Technologies Inc. (AKAM), which provides server space that helps websites load faster, dropped in late trading after its second-quarter revenue forecast fell short of analysts’ estimates.
Akamai decreased $3.81, or 9.3 percent, to $37.17 as of 4:57 p.m. New York time in extended Nasdaq Stock Market trading. Sales will be $270 million to $280 million, Chief Financial Officer J. Donald Sherman said today on a conference call. Analysts in a Bloomberg survey predicted $280.7 million.
Most of the company’s revenue comes from services such as application acceleration, managing digital rights to content and cloud-computing security. The company delivers data for Apple Inc. (AAPL)’s iTunes and streams video for Netflix Inc. (NFLX) Sales may have been crimped by pressure on pricing, said Michael Olson, an analyst with Piper Jaffray & Co. in Minneapolis.
“They indicated pricing was coming down because of renewal of a whole bunch of contracts,” Olson, who rates the stock “overweight,” said in an interview before the forecast was announced on the call. “The guidance will tell us whether the pricing environment is truly stable. If they guide below the street, there’s continued deceleration.”
Profit excluding some items was 38 cents a share, the Cambridge, Massachusetts-based company said in a statement. That exceeded 36-cent average analyst estimate compiled by Bloomberg. The company authorized a $150 million expansion of its share repurchase program. First-quarter sales rose 15 percent to $276 million from $240 million a year earlier. Analysts on average predicted sales would jump to $272.3 million. Net income increased 24 percent to $50.6 million, or 26 cents a share, from $40.9 million, or 22 cents, the previous year.
Profit Potential
Akamai’s shares gained 16 percent in the year before today as investors bet on the company’s potential to profit from surging Internet use. Cisco Systems Inc., the largest maker of computer-networking gear, projects global online traffic will increase fourfold from 2009 to 2014.
Akamai’s stock has also gotten a boost from speculation that the company may be a takeover target. Akamai has been the subject of more published buyout rumors than any other company since 2005, according to Bloomberg analysis.
Good judgment comes from experience, and a lot of that comes from bad judgment.
