Akamai Technologies Inc. (NASDAQ: AKAM): Q2 Earnings Preview 2011

Akamai Technologies Inc. (NASDAQ: AKAM) is scheduled to release its second-quarter earnings after the closing bell on Wednesday, July 27, 2011. Analysts, on average, expect the company to report earnings of 36 cents per share on revenue of $277.98 million. In the year ago period, the company reported earnings of 34 cents per share on revenue of $245.32 million.

Akamai supports the delivery of content like music and video over the Internet by navigating less-congested network routes. It also helps with online shopping sites, and the company is usually paid based on how much traffic it handles. Akamai handles 15 percent to 30 percent of all online traffic, according to its website, and the company counts more than half of the largest 500 U.S. Internet retailers as customers. The company delivers data for Apple Inc.’s (NASDAQ: AAPL) iTunes and streams video for Netflix Inc. (NASDAQ: NFLX).

In the preceding first quarter, the Cambridge, Massachusetts-based company's net income was $50.6 million, or 26 cents per share, compared to $40.9 million, or 22 cents per share in the year-ago quarter. Revenue rose to $276 million from $240 million. Analysts, on average, expected the company to report earnings of 37 cents per share on revenue of $372.03 million. . 

At its last earnings call in April, Akamai said that it expects second-quarter revenue in the range of $270.0 million to $280.0 million (10% to 14% year-over-year growth) for second quarter of 2011. Favorable foreign exchange is expected to have an impact of approximately $10 million on a year-over-year basis. Akamai expects cash gross margins to remain roughly stable at about 80% and GAAP gross margins to come in at 67%–68%. For the second quarter, Akamai expects operating expenses to increase by about $7 million to $8 million year over year, which will include the annual impact of budgeted salary increases. Akamai expects adjusted EBITDA margins in the range of 44% to 45%. Normalized EPS is expected in the 34 cents to 37 cents range, including tax charge in the range of $17 million to $21 million based on a full-year GAAP tax rate of about 32% to 33%. Akamai forecasts capital expenditure of approximately $50 million for the second quarter excluding equity compensation and expects capital expenditure for fiscal 2011 to be at the upper end or slightly above Akamai’s long-term model of 13% to 16% of revenue.

Akamai has benefite from increasing adoption of online services and cloud computing. The company has enjoyed double-digit year-over-year percentage revenue growth for the past four quarters. Media content is rising at a significant pace.Akamai's technology is crucial for delivering high-definition video as online services like Netflix and Hulu explode in popularity pace as more video content moves online and video quality increases (HD video). The company has benefited from increase in e-commerce transactions and online video content. 

The company is expanding its presence in Central and Eastern Europe (CEE). The company will extend its services to five countries in the region namely Czech Republic, Hungary, Poland, Romania and Slovakia. Akamai will also open a branch office in Krakow, Poland to support its CEE customers. Akamai is expected to benefit from the huge demand in the region. According to research firm, Forrester, the CEE region is estimated to reach overall Internet adoption rates of 54% by 2013.

However, Akamai is facing more competition from companies including Limelight Networks, Inc. (NASDAQ: LLNW), Level 3 Communications Inc. (NASDAQ: LVLT) and Cotendo Inc. for CDNs, which distribute movies, music and software to computers on behalf of services such as Hulu LLC and Netflix. 

Full Disclosure: None.

Akamai Technologies Inc. (NASDAQ: AKAM): Q1 Earnings Preview 2011

Akamai Technologies Inc. (NASDAQ: AKAM) is scheduled to release its first-quarter earnings after the closing bell on Wednesday, April 27, 2011. Analysts, on average, expect the company to report earnings of 37 cents per share on revenue of $372.03 million. In the year ago period, the company reported earnings of 35 cents per share on revenue of $240.03 million.

Akamai supports the delivery of content like music and video over the Internet by navigating less-congested network routes. It also helps with online shopping sites, and the company is usually paid based on how much traffic it handles. Akamai handles 15 percent to 30 percent of all online traffic, according to its website, and the company counts more than half of the largest 500 U.S. Internet retailers as customers. The company delivers data for Apple Inc.’s (NASDAQ: AAPL) iTunes and streams video for Netflix Inc.

In the preceding fourth quarter, the Cambridge, Massachusetts-based company's net income was $52.5 million, or 27 cents per share, compared to $40.1 million, or 21 cents per share, in the year-earlier quarter. On an adjusted basis, the company earned 40 cents in the fourth quarter. Revenue increased 19% to $284.67 million from $238.31 million in the same quarter last year. Analysts, on average, expected the company to report earnings of 38 cents per share on revenue of $283.08 million. 

At its last earnings call in February, the company forecast first quarter normalized earnings of 35 cents to 37 cents per share and revenue of $265 million to $275 million.

Media content is rising at a significant pace.Akamai's technology is crucial for delivering high-definition video as online services like Netflix and Hulu explode in popularity pace as more video content moves online and video quality increases (HD video). The company has benefited from increase in e-commerce transactions and online video content. 

However, Akamai is facing more competition from companies including Limelight, Level 3 Communications Inc. and Cotendo Inc. for CDNs, which distribute movies, music and software to computers on behalf of services such as Hulu LLC and Netflix Inc. (NASDAQ: NFLX). Shares of the company were battered after Level 3 Communications said in November that it was chosen as a primary content-delivery network for Netflix.

At its last earnings call in January, the company said that Akamai renewed long-term deals with eight out of 10 major media customers, including Netflix (NASDAQ: NFLX), but at lower prices that will hurt revenue in the first quarter.

Among other developments, IBM (NYSE: IBM) recently partnered with Akamai to accelerate the delivery of Web and cloud applications for customers by integrating its WebSphere technology with Akamai’s application delivery network. 

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 22.55 and PEG ratio (5 yr expected) of 1.47. In terms of stock performance, Akamai shares have gained nearly 15 percent over the past year.

Full Disclosure: None.

Akamai Technologies Inc. (NASDAQ: AKAM): Q4 Earnings Preview 2010

Akamai Technologies Inc. (NASDAQ: AKAM) is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, February 9, 2011. Analysts, on average, expect the company to report earnings of 38 cents per share on revenue of $283.08 million. In the year ago period, the company reported earnings of 46 cents per share on revenue of $238.30 million.

Akamai supports the delivery of content like music and video over the Internet by navigating less-congested network routes. It also helps with online shopping sites, and the company is usually paid based on how much traffic it handles.

In the preceding third quarter, the Cambridge, Massachusetts-based company's net income was $39.7 million or $0.21 per share, compared to $32.7 million or $0.18 per share in the prior year quarter. Excluding items, normalized net income grew to $64.2 million or $0.34 per share from $52.3 million or $0.28 per share in the year-ago quarter. Revenue increased 23% to $253.6 million from $206.5 million in the same quarter last year.

At its last earnings call in October, the company said that it expects fourth quarter revenue of $272 million to $285 million and earnings per share of $0.35 to $0.38.  Cash gross margins are expected to be in the range of 80% to 81%, and GAAP gross margins, including equity compensation, will remain around 59%, the company said. The fourth quarter tends to be its strongest quarter.

Looking ahead to fiscal 2011, the company said that the current Street consensus of 15% top line growth is probably a conservative estimate. 

Akamai is facing more competition from companies including Limelight, Level 3 Communications Inc. and Cotendo Inc. for CDNs, which distribute movies, music and software to computers on behalf of services such as Hulu LLC and Netflix Inc. (NASDAQ: NFLX). Shares of the company were battered after Level 3 Communications said in November that it was chosen as a primary content-delivery network for Netflix.

In December, the company disappointed investors hoping that the Internet content delivery company would raise its quarterly outlook, keeping forecasts unchanged while warning that pricing would fall. The company said that it expects pricing to fall "aggressively" ahead, confirming investors' fears that competition was intensifying. The company also said that an increase in traffic would make up for the fall in pricing, and forecast annual revenue to eventually rise to $5 billion. 

Also in December, the company lost a court ruling in its four-year patent battle with Limelight Networks Inc. over software that speeds delivery of Web videos. The U.S. Court of Appeals for the Federal Circuit in Washington said Limelight didn’t infringe a patent related to content delivery networks, or CDNs. U.S. District Judge Rya Zobel in Boston was correct to throw out a $45.5 million jury verdict that Akamai won in 2008.

Full Disclosure: None.