Akamai accelerates content delivery over the Internet. This is particularly important to companies that sell merchandise, but it is also important for companies that generate revenue from advertisements. Akamai's revenue growth rate has slowed, but it is still growing despite the economic turmoil that has knocked down revenues at many technology companies.
Akamai reported revenue for the quarter ending September 30, 2008 (Q3) at $197.3 million, up 2% sequentially from $194.0 million and up 22% from $161.2 million year-earlier.
GAAP net income was $33.4 million, down 3% sequentially from $34.3 million but up 36% from $24.6 million year-earlier. GAAP EPS (earnings per share) were $0.18.
Those are great results (for more details see my Akamai (AKAM) analyst conference summary for Q3 2008). When it comes down to it, almost no one wants to save a little money in a downturn by making the response time of their Web site climb, which would lose customers and revenues.
For the fourth quarter, management guided to revenue of $202 to $210 million. This includes $4 to $5 million revenue from the Acerno acquisition. Q4 is usually a strong one for Akamai. They are expecting some impact from the economic softening, with advertisement dollars weak and Internet sales not climbing as fast as in the past few years.
83 new customers were signed in the quarter, and Akamai's newer value-added services contributed significantly to revenue and to the ability to get new customers.
Akamai is also getting more directly into the advertisement business with its Advertising Decisions Solutions segment. Acerno was bought to help with that. Once Acerno is integrated with Akamai, expect revenue from this segment to grow through 2009 and beyond.
Akamai still seems to be able to stay ahead of competitors in the Internet acceleration arena. Since Akamai is profitable and many of its competitors are not, it is possible there will be consolidation to Akamai's benefit if the recession lasts in 2009. Also Akamai's customers are mostly profitable at this point. Competitors have tended to pick up newer companies that are not yet making profits.
On the other hand, I don't think Akamai would be immune to a severe recession. At some point it would lose enough customers to impact net income substantially.
Fortunately, Akamai generates a lot of cash compared to revenues. Cash from operations in the quarter was an amazing $93 million, an amazing 47% of revenue.
Akamai also had plenty of cash on its balance sheets, $789 million at the end of the quarter.
A year ago if you wanted to buy Akamai stock you would have paid dearly for it. Today, like most stocks, it is a bargain. I own some Akamai stock, so consider that I may be biased.
There is risk everywhere, but there is opportunity in quite a few places too, so
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