King of content delivery networks reports big Q4 sales and boosts expectations for 2007; but GAAP earnings fell

February 7, 2007

2 Min Read
Akamai Shows No Jitter in Q4

The content delivery network provider Akamai Technologies Inc. (Nasdaq: AKAM) reported continued strong sales Wednesday, thanks to strong demand for its services by media and entertainment companies.

For its fourth quarter, excluding special items, the company earned $47.5 million, or 27 cents per share, on revenues of $125.7 million. This beat analysts' expectation of 26 cents EPS on revenues of $124.9 million.

On a GAAP basis, fourth-quarter earnings fell to $20.6 million, or 12 cents per share, from $25.8 million, or 16 cents per share, during the same period last year. That decline is due mainly to $40 million in depreciation and amortization charges, $49.6 million in stock options expenses, and other special items during the quarter.

For full-year 2006, Akamai's revenues grew 51 percent to $428.7 million.

Akamai operates a large network that hosts and streams content close to consumers, improving delivery times. Analysts say that as more consumers buy or convert to broadband service, the need to send high-bandwidth content, services, and applications grows. (See Video Caching Steps Into the Limelight.)

The company told analysts Wednesday it added 78 new customers in the fourth quarter. Another 123 new customers came from Akamai's Nine Systems acquisition, which closed in December. Akamai says it added a total of 2,347 new customers in 2006.

Akamai expects earning of 28 cents per share for the first quarter of 2007, says CFO J.D. Sherman.

"The media and entertainment space was the fastest growing segment as consumers listen to more songs and watch more video," says CEO Paul Sagan. Sagan adds that his company has seen "a flood of rich media advertising on the Web" in recent quarters.

Sagan says seven of the top 10 user-generated content sites used Akamai during 2006. Akamai also recently expanded its relationship with MySpace, Sagan told analysts.

Akaimai expects those trends to continue. "We now expect revenue to grow to $610 to $625 million for the year, which translates into a range of 42 percent to 46 percent revenue growth year-over-year," CFO J.D. Sherman told analysts. "This is a $50 million increase to our previous guidance." "Near term, for the first quarter of this year, we’re expecting revenue to be in the range of $136 to $140 million," Sherman said.

Analysts say Akamai's market leadership is caused by the growth of the CDN business itself as much as anything else. (See Content Delivery Takes the Limelight in '06.)

"I don't know if they're actually winning market share, and with the market itself growing at such a phenomenal rate I think there's more than enough room for Akamai to continue to put up top-line growth of greater than 30 percent in the next few years," says Merriman Curhan Ford & Co. analyst Colby Synesael.

— Mark Sullivan, Reporter, Light Reading

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