Akamai Technologies Inc. (AKAM): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Akamai reported strong fourth quarter results beating the Zacks Consensus Estimate on both lines. The company also provided positive outlook for 2014. We believe strong demand for cloud infrastructure solutions, security, mobile products and online video will drive top-line growth, going forward. Moreover, the company's dominance in the web application business is expected to be a significant growth catalyst, going ahead. However, intense competition has kept pricing under tremendous pressure, which is a significant headwind, going forward. In order to differentiate its products, Akamai is significantly investing in R&D and is also expanding its sales force through new appointments. This will negatively impact profitability, going forward. Thus, we remain Neutral and set a price target of $61.00.

Overview:

Headquartered in Cambridge, Mass., Akamai Technologies, Inc. (AKAM) is a global provider of content delivery network (CDN) and cloud infrastructure services. The company's solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for Web pages, streaming video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.

The company's solutions allow its customers to operate their web transactions anywhere anytime with cost-effective outsourced infrastructure and carry out predictable, scalable and secure e-business at low costs. These solutions are built on the Akamai EdgePlatform, which is the technological platform for its business solutions and hosts some of the world's best-known Internet brand names, such as iTunes. Akamai's platform comprises more than 141,000 servers located in over 1,200 networks around the world.

Akamai reported revenues of $1.37 billion, up 19% year over year in 2012. The company offers five core solutions to its customers namely Terra, Aqua, Sola, Kona and Aura. Through these solutions, the company provides application and cloud performance services (Terra), digital media, software distribution and storage services (Sola), website optimization services (Aqua), security tools (Kona), network operator solutions and other Internet-based offerings (Aura).

Akamai earns revenues through five industry verticals namely Media & Entertainment, Commerce, Enterprise, High Tech and Public Sector. The company markets and sells its services and solutions both domestically and internationally through direct sales and more than 100 active channel partners, including AT&T, IBM, Verizon and Telefonica Group.

Resellers accounted for 22.0% of total revenue in 2012. The company derived 72.0% of its revenues from the U.S., while the remaining 28.0% came from its foreign operations, of which Europe alone accounted for 17% in 2012.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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