With the growing demand for
Akamai Technologies Inc.
) cloud based services in the Latin American countries, the company
is opening a new services and support center in Costa Rica. Through
this initiative the company will deliver its cloud infrastructure
Expansionary initiatives to cater to Argentina, Brazil, Chile,
Colombia, Mexico and Peru bode well for the company's long-term
prospects as these countries have recorded a steady growth in
online usage in recent times. Brazil and Mexico accounted for the
highest online usage. Market research firm Gartner expects IT
spending in Brazil and Mexico to exceed $140 billion and $56
billion in 2012, respectively. Moreover, Gartner expects Latin
America to generate approximately $326 billion in IT spending this
Akamai's cloud infrastructure solutions have been seeing robust
demand. In the last concluded quarter, this segment comprised 58%
of its total revenue, an increase of 22% on a year-over-year
According to Gartner, the global cloud services market is
expected to grow 19.6% in 2012 to $109.0 billion. Moreover, the
cloud management and security services segment is estimated to
reach $3.3 billion in 2012. Gartner expects Argentina, Mexico and
Brazil to be some of the strongest markets this year. This
tremendous growth potential will benefit Akamai, especially in the
enterprise segment where cloud technologies are being adopted
However, Akamai has been facing margin contraction due to
competition from companies such as
Level 3 Communications Inc.
Limelight Networks, Inc.
) and carriers such as
Verizon Communications Inc.
), who are developing their own content delivery network.
Nonetheless, we believe that strong demand for cloud
infrastructure solutions, security and mobile products, online
video, aggressive share repurchase and strategic partnerships are
positives for the stock over the long term. Moreover, the company's
strategic acquisitions would act as a positive catalyst going
Thus, we maintain our Neutral recommendation on a long-term
basis (6-12 months). Currently, Akamai has a Zacks #2 Rank, which
implies a Buy rating on a short-term basis.
AKAMAI TECH (AKAM): Free Stock Analysis Report
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