In its earnings report today after the bell, Akamai (AKAM: chart, news) checked in with revenues of $204.6M and normalized earnings per share of $0.40, both down from $210.4 and $0.43 in the prior quarter and both apparently below expectations which seem to have been expecting something more flat with Q1. The company blamed difficult market conditions for its customers, or in other words the economy was tough this quarter. Certainly Akamai’s shareholders are feeling a cold wind blowing, two consecutive sequential declines aren’t something they are accustomed to.
Now, Akamai is the 800lb gorilla of the CDN space, so if the economy is hurting them it’s certainly hurting everyone. But the sector has also been more competitive of late, with both Limelight Networks (LLNW: chart, news) and Level 3 Communications (LVLT: chart, news) working hard to increase their CDN market share. It will be interesting to see how each did relative to Akamai in the second quarter, i.e. was it really just the economy? Or are inroads being made as well? Akamai said it has been getting traction in the value added space, one would think that the recession would hurt that too if it were across the board.
On the other hand, Akamai has all sorts of resources and continues to generate excellent profits on amazing margins despite the deepest recession we have seen in a long time. There’s a lot of horsepower in that engine.
Maybe a wake up call to the arrogant AKAM investors.
We will only know if arrogance is removed when “Motley Fools” turn their cheek, or at least address this name with fewer open arms.