Bloomberg News

Akamai Falls as Third-Quarter Forecast Misses Estimates

July 27, 2011

(Updates with third-quarter forecast in first paragraph.)

July 27 (Bloomberg) -- Akamai Technologies Inc., the operator of a server network that lets businesses deliver data quickly, fell as much as 14 percent in late trading after its third-quarter revenue and earnings forecast missed estimates.

Profit will be 31 cents to 34 cents a share, excluding some items, said Akamai Chief Financial Officer J.D. Sherman on a conference call today. That compares with analysts’ estimates of 38 cents. The company expects sales of $273 million to $283 million, compared projections of $288.7 million.

Akamai, which counts Apple Inc. and Netflix Inc. as customers, provides services such as application acceleration and cloud-computing security. The company is grappling with more competition from rivals such as Limelight Networks Inc. and Level 3 Communications Inc., said Chad Bartley, an analyst at Pacific Crest Securities Inc. in Portland, Oregon.

“There are more solutions, more alternatives to Akamai,” said Bartley, who has a “sector-perform” rating on the stock and doesn’t own it. “Limelight and Level 3 are improving. We are seeing more pricing pressure.”

Akamai fell to $25.22 at 6:20 p.m. New York time in late trading after closing at $29.48 on the Nasdaq Stock Market. The shares have declined 37 percent this year.

Second-Quarter Results

Second-quarter profit excluding some items was 35 cents a share, the Cambridge, Massachusetts-based company said in a statement. That fell short of the 37 cent average analyst estimate compiled by Bloomberg. Net income increased 26 percent to $47.9 million, or 25 cents a share, from $38.1 million, or 20 cents, a year earlier.

Second-quarter results were weighed down by a tax charge of $28.3 million at a rate of 35 percent, higher than the forecast rate of 32 percent to 33 percent, the company said in the statement.

“It was a solid quarter for us,” said Paul Sagan, chief executive officer of Akamai, in a telephone interview after results were released. “We’re going to work hard on increasing the growth rate over time because that’s clearly a concern for folks and we think there’s a lot more opportunity we can be executing against.”

Second-quarter sales rose 13 percent to $277 million from $245.3 million a year earlier. Analysts on average predicted sales of $277.8 million.

The company expects 10 percent to 13 percent growth in revenue for the year, said Sherman.

--Editors: Donna Alvarado, Jillian Ward

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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