Over in the CDN/Cloud segment, Akamai also had a good third quarter but sees a dark cloud or two ahead in Q4 that will dampen any celebrations. Revenues were higher than both analyst estimates and the company’s guidance, as were their non-GAAP earnings per share. Here are their numbers in some context:
| $ in millions | Q3/12 | Q4/12 | Q1/13 | Q2/13 | Q3/13 | Q4/13 (guidance) |
|---|---|---|---|---|---|---|
| Revenue | 345.3 | 377.9 | 368.0 | 378.1 | 395.8 | 412-430 |
| COS | 110.0 | 111.9 | 120.4 | 124.7 | 132.0 | |
| SG&A+R&D | 149.7 | 164.4 | 140.0 | 149.8 | 159.3 | |
| Gross Margin % | 68.1% | 70.4% | 67.2% | 67.0% | 66.6% | |
| Adj. EPS | 0.43 | 0.54 | 0.51 | 0.46 | 0.50 | 0.49-0.53 |
Akamai says it is in the midst of a renegotiation for pricing with its largest media customer, whom they didn’t actually name but whom everyone knows is Apple. The lower end of guidance reflects the effects of that hitting in Q4 although it probably won’t hit until Q1 of next year. But the key bit of guidance that the street doesn’t like is that the effects of the expected Apple repricing will continue holding things down for a few quarters.
And given the fact that Akamai’s stock price had been bumping up against the highs of three years ago, it was enough to send them down 13% after hours. But of course such repricing events happen all the time in this industry, but it isn’t always Apple on the other side of the table.
On the brighter side of the earnings report, Akamai announced a new $750M stock buyback program to take place over the next three years. Under the previous buyback program Akamai had bought back $112M in stock so far in 2013.
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Do you think that part of the renegotiation has anything to do with Level (3)’s competitive advantage of owning the network that we always hear so much about but that we have never really seen proof of??
Ummm, only to the extent that Level 3’s pricing is part of the competitive landscape, in which pricing for CDN bits delivered only ever goes down and contracts get renegotiated along the way…
Now now, don’t be so hard on poor old Level 3. It has only been around 15 years or so now for them. Apparently the proof might take a few decades is all. Patience.. lol.
ABC,
And I thought you switched from the “dark” side!!
Justgo
ABC,
And I thought you switched from the “dark” side.
Justgo