Akamai reported mixed second-quarter 2014 results. Management
provided optimistic third-quarter guidance due to strong
performance expectation across the product portfolio. However,
continuing investments, higher R&D expense and sales force
expansion are expected to hurt margins in the near term. However,
these investments will help Akamai address the growing traffic
needs of customers in the long run. We believe that strong demand
for cloud infrastructure solutions, security, mobile products and
online video will drive the company's top-line growth going
forward. Akamai s partnership with the likes of Microsoft, Cisco,
AT&T and IBM, will boost top-line growth over the long term.
Moreover, the company's superior content delivery platform, that
provides high-quality service at a much lower rate compared to its
peers, is a key differentiator. Additionally, the company's
dominant position in the web application industry is expected to be
a meaningful growth catalyst. However, intense competition has kept
pricing under tremendous pressure, particularly in media segment,
which is a significant headwind. We maintain our Neutral
recommendation and set a price target of $61.00.
Headquartered in Cambridge, MA, 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 of 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 customers to operate their web
transactions anywhere anytime with cost-effective outsourced
infrastructure and carry out predictable, scalable and secure
e-business at low cost. 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
Akamai reported revenues of $1.58 billion in 2013, up 15.3% year
over year. 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
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 21% of total revenue in
2013. The company derived 71% of its revenues from the U.S., while
the remaining 29% came from its foreign operations.
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