Akamai Finds Its Mojo

February 3rd, 2010 by · 5 Comments

Many eyes have been trained on today’s report by Akamai (NASDAQ:AKAM, news, filings).  The company upset the status quo in the fall by lowering prices and setting off a bit of a pricing war.  Events went better than planned, and in December they unexpectedly offered increased guidance.  But what is really going on in the CDN marketplace has been somewhat opaque until these numbers.  What numbers, you ask?  Oh yeah…Here is a quick table:

Q1/09 Q2/09 Q3/09 Q4/09



Revenue 210.4 204.6 206.5 238.3 230-235
COS 60.4 60.0 62.0 67.6
SG&A 89.2 86.0 89.7 104.4
Gross Margin 71.3% 70.7% 70.0%


Adjusted EPS 0.43 0.40 0.38 0.46 0.42-0.43

As you can see, Akamai did not disappoint.  Revenues of $238.3M brought an emphatic end to the revenue stagnation they had been struggling against – that’s 15% sequential growth, very powerful even for their seasonally strongest quarter.  And they did so without doing further damage to their margins, as lower prices apparently brought in enough new bits to gain the advantages of scale. Overall Akamai had a heck of a quarter by any measure.

For 2010, the company did not offer full year guidance – just that they are cautiously optimistic.  They have now used up all much of their net operating losses, and hence will be paying more taxes going forward which will make apples to apples comparisons a bit more difficult for a while.  For the first quarter revenues are expected to fall sequentially to $224-233M.  Gross and EBITDA margins will fall slightly, and earnings per share of $0.30-0.32.

The stock is down after hours, but the stock has been rising in anticipation for months and likely  simply overshot in the near term.  Now the question is how the competition fared as Akamai roared and how effective their response will be.

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5 Comments So Far

  • Akamai Shareholder says:

    > They have now used up all their net operating losses,

    I believe you misinterpreted the information. I heard they would use them up by 2011, and that 2010 was essentially covered, maybe with the exception of a couple percent.

    As some evidence, check the balance sheet:

    Deferred income tax assets, net
    2009 2008
    146,914 223,718

    Wouldn’t that be zero if they were all “used up”?

    • Rob Powell says:

      Point taken, I have modified the article. I ought to know better than to use words like ‘all’ when it comes to accounting by now. Thanks for the correction.

  • carlk says:

    Do you have a handle on their over one quarter billion marketable securities tied to student loans? How are they valuing them in this climate of defaults ravaging every walk of life, top to bottom? Is that par value that they’re quoting if they went to the piggy bank today?

    Also, 2010 is beginning with a higher tax rate notwithstanding due to the loss of “TAX CREDITS” at this juncture.

    P.S. The transcript had mistakenly recorded Q1 versus Q4 at the tail of this statement, so I took the liberty to change it to what I know is correct when comparing YOY and “sequential” data as was intended. Otherwise, it would have been redundant without the change.

  • carlk says:

    Oh, that’s right, you can’t copy and paste onto this site from Google’s browser, I think; therefore, you’ll have to go to the transcript yourselves. You’ll notice a 39 percent tax rate in Q1 due to loss of R&D “credits.”

    It’s all there in black and white!

    Oh how a “credit” is significant versus a “deduction” or expense reductions towards bottom lines where taxes are paid!

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