August 3, 2009 - Akamai Technologies, Inc. (AKAM-NASDAQ) provides services for accelerating and improving the delivery of content and applications over the Internet. The company's Application Performance solutions improve the performance of dynamic applications used by enterprises to connect with their employees, suppliers, and customers. Its Application Performance solutions include Web Application Accelerator, which is used by enterprise customers to run various applications; and IP Application Accelerator, designed to address core Internet weaknesses to optimize the performance and real-time sensitivity associated with IP-enabled applications delivered over Internet-related protocols.

The company's Dynamic Site solutions accelerate business-to-consumer Web sites that integrate collaborative content and applications into their online architecture. It also offers other solutions, which comprise Edge Control tools that provide reporting and management capabilities; network data feeds and Website analytics, which provide customers with real time data about the performance of their content and applications over the Internet; and performance management services that help customers better understand their Web operations with tools that measure various aspects of an application's performance.

In addition, Akamai offers custom solutions to commercial and government customers. It has a strategic agreement with KITdigital, Inc. The company was founded in 1998 and is headquartered in Cambridge, Massachusetts.

The more people leave their newspapers, magazines and TV's behind and use the Internet as their medium for news and entertainment, the more business Akamai does. It's currently the market leader in Internet video streaming, the technology that lets you watch movies and sports on your computer. As more viewers migrate to the Web for live events and/or movies, more companies will want to offer their shows via the computer. That should lead to more contracts for AKAM.

The company announced earnings on Wednesday, July 29, and investors were a little disappointed. Revenues were up only 5% for the quarter compared to the same period last year. Earnings per share were 40 cents per diluted share on a non-GAAP basis, below estimates of 41 cents a share and down 2% from last year's second quarter. One reason for the shortfall was that a major advertising contract with a retailer didn't happen in the last week of the quarter which would have been $1.4 million in additional profit.

Consensus estimates for the third quarter from 20 analysts is for the company to earn 35 cents a share, down from 40 cents in the third quarter last year, then 39 cents in the 4th quarter, down from 44 cents in the last period of 2008. For the full year, consensus estimate is for $1.58, below the $1.66 made last year. For 2010, $1.62.

Of course, these numbers are generated from an economy that is almost frozen with fear. Major clients are reducing their operating budgets and conserving capital. That may continue for at least 3 or 4 more quarters. But once an economic turn is evident, expect to see budgets enlarged and spending come rather quickly as streaming video sees more demand.

The life blood of any technology firm is new products. With almost a half billion dollars in cash ($450 million in the most recent quarter) and a healthy balance sheet (debt is only 11% of capital), Research and Development funding will continue at a robust rate which means new products and upgrades for existing ones.

More numbers: Market Cap is $2.85 billion. Price to Book is 1.75. Operating margin for the last 12 months was 31.71% and the Profit margin was 17.85%. Cash per share is $2.61. Total debt is $199.8 million. Current ratio is 7.02. Book value per share is $9.45. There is no dividend.

This stock sold for 60 cents a share in 2002, rallied to $59.70 in 2007, then broke back to a low of $9.25 in the fourth quarter of last year. Now it's starting to rally again. Whether it can keep the current upward momentum will depend on the economy and new products. There's no question Akamai has a lead position now but competition is strong, and the economy is well beyond their (or anyone's) control. But if the economy begins to recover, look for Akamai to do well as more of their clients deliver news and entertainment via the Web.

 Company Web site: www.akamai.com

- Ted Allrich