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Akamai's Big Q1 Disappoints

Raymond McConville
News Analysis
Raymond McConville
4/25/2007

The leading content delivery network provider Akamai Technologies Inc. (Nasdaq: AKAM) reported a very strong first quarter this afternoon, thanks to its enterprise customers continuing to move more and more content.

However, investors were expecting bigger numbers, and the company's stock tumbled $5.62 (10.29%) to $48.97 in normal trading on Wednesday as a result.

For the first quarter of 2007, Akamai reported GAAP earnings of $19.2 million, or 11 cents a share, on revenues of $139.3 million. In the same quarter last year, it earned $11.5 million, or 7 cents a share, on revenues of $90.8 million.

Despite the 53 percent jump in revenues and 67 percent jump in profits, the financials fell slightly short of analysts expectations according to Reuters Research which showed GAAP income coming in about $500,000 higher.

The company told analysts today that it added 89 new customers during the quarter and 45 customers through its acquisition of Netli bringing its total number of customers to 2,481 and an ARPU figure of $19,000.

During the first quarter, Akamai had also announced its plans to acquire Red Swoosh and Nine Systems. (See Akamai Swoops on Red Swoosh and Akamai Completes Buy.) These additions are expected to temporarily dampen ARPU figures but the company figures that these numbers will eventually return to normal once significant revenues are seen.

Overall, the continued increase in demand to move content quickly and efficiently fueled another strong quarter for Akamai. Event driven catalysts such as the NCAA March Madness tournament were cited as big traffic drivers as many basketball fans looked to view clips of the games through Internet video sites.

In addition to the ever-growing needs of its media company customers, Akamai cited an increase in applications being delivered over the internet by business-to-business customers and continued cost savings from the development of its edge network as drivers of revenue.

Akamai's stock has continued to fall in after hours trading, down $0.52 (1.07%) to $48.45.

— Raymond McConville, Reporter, Light Reading

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