Replies to post #867 on Akamai Technologies, Inc. (AKAM)

[eastunder]

Akamai Shares Tumble Despite Penny Beat
Michael Baron
04/27/11 - 05:46 PM EDT

Updated from 5:05 p.m. ET to include some detail on conference call, latest share price..

NEW YORK (TheStreet) -- Shares of Akamai Technologies(AKAM) were weak in late trades on Wednesday after the Cambridge, Mass.-based company edged quarterly profit expectations by a penny.

The company, which bills itself these days as a provider of "cloud optimization" services, reported normalized earnings of $72.2 million, or 38 cents a share, for the three months ended in March. Revenue rose 15% year-over-year to $276 million in the March quarter. No outlook was provided in the company's press release.

The average estimate of analysts polled by Thomson Reuters was for a profit of 37 cents a share in the March period on revenue of $272 million.

Akamai's core products include software to accelerate the delivery of Web applications and improve network security and traffic management. The company said Wednesday its "value-added" offerings, such as e-commerce and advertising applications, are doing particularly well.

"Continued demand for our value-added solutions, now comprising almost 60 percent of our business, drove our strong results in the first quarter," said Paul Sagan, the company's CEO in a press release. "We have built a portfolio of cloud computing solutions that leverages our intelligent Internet platform and is designed to address the diverse needs of businesses on the Web."

After meandering higher immediately after the earnings report, Akamai shares turned sharply lower in after-hours trades. The drop coincided with the company's conference call, which began at 4:30 p.m. ET.

The stock was last quoted at $36.95, down 9.8%, on volume of more than 2.1 million, according to Nasdaq.com. Based on a regular session close at $40.98, the shares were up roughly 20% in the past year, but had pulled back 25% since hitting a 52-week high of $54.65 back on Dec. 8.

The reason for the drop in the shares is murky, in part because Akamai makes a point of not providing specific guidance. Illustrating the confusion about how executive comments from earlier in the call about the business environment should be interpreted was the final question of the Q&A portion where Chad Bartley of Pacific Crest Securities asked for clarity about whether Akamai was "backing away" from expectations for 15% revenue growth in fiscal 2011

Bartley was told the company doesn't give guidance and wouldn't be commenting further, although Akamai executives did allow that it's "fair to say" the company has an objective in mind.

Wall Street was split on Akamai ahead of the report with 14 of the 26 analysts covering the stock rating it at hold and the remainder split between buy (4) and strong buy (8). The median 12-month price target sits at $50.

At current levels, the stock has a forward price-to-earnings ratio of 23X based on a fiscal 2012 average analysts' view for profit of $1.79 a share, making the shares look affordable compared smaller competitors like Limelight Networks(LLNW) at 110X and Internap Network Services(INAP) at 35X.

Aside from the results, Akamai's board also approved another $150 million repurchase authorization, a second expansion of its buyback program, to be funded by cash from operations.

The company said it repurchased roughly 1 million common shares in the March quarter, spending $42.8 million for an average price of $41.60 per share. At quarter's end, Akamai had roughly 187 million outstanding common shares.

[eastunder]

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.