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Akamai still a 'show me' stock
By Bambi Francisco,
CBS.MarketWatch.comLast Update: 11:28 AM ET Apr 19, 2002
SAN FRANCISCO (CBS.MW) -- Back in 1999, many believed companies would be
outsourcing their Internet infrastructure and they'd do it overnight. That's
what drove the valuation of Akamai to $20 billion one month after going public
that year.
Fast forward: It's not happening the way we expected.
"Are we ready for this gigantic migration to Web outsourcing?" asked Adam
Holiber, an analyst at Wedbush Morgan Securities. "Not yet. We're still
waiting."
Akamai (<A
href="http://cbs.marketwatch.com/tools/quotes/detail.asp?view=detail&symb=AKAM&siteid=mktw&dist=nwhstocks";><FONT
color=#000099>AKAM), which derives about 85 percent of its sales from
a service to help speed up the delivery of content, announced its quarterly
results late Thursday that were in line with estimates, but brought down its
revenue goals in the current quarter to about 8 percent below analysts'
expectations.
But its outlook remains "challenging," wrote Sanjay Puri, an analyst at
Thomas Weisel Partners. Akamai remains a "show me" stock. Shares of Akamai fell
12 percent to $3.63 Friday, and it now carries a market valuation of about $419
million.
Akamai runs a network of 12,674 servers that "warehouse" images and content
from Web pages, allowing faster downloads from the nearest Akamai server.
"I'm looking for continued improvement in EBITDA [earnings before interest,
taxes, depreciation and amortization] profitability and a reduction in cash
burn," Puri said. On a normalized basis, Akamai burned $24 million in the
quarter, down from $29 million. "On a positive note, the average revenue per
customer is going up and they're showing leverage in their business model by
gross margin improvements."
What's more, it doesn't appear that Akamai is giving significant discounts,
Puri said. Those who don't want to pay up are going to vendors that provide
lower-end solutions, Puri said.
Akamai's 1,055 customers are paying an average of $11,168 per month, up from
$8,360. This gain is partly due to the migration of customers to Akamai's
higher-end EdgeSuite product. The average revenue per recurring EdgeSuite
customer per month is $20,300.
TWP was a co-manager on Akamai's IPO in 1999 as well as a convertible note
security offering in 2000.
<BLOCKQUOTE
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----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
M.
Simms
To: <A title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Friday, April 19, 2002 11:45
AM
Subject: RE: [RT] YHOO
OMIGOSH - check out the once powerful
Akamai....AKAM...they getting crushed.......once a powerful internet
infrastructure stock.
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