UPDATE 2-Akamai disappoints investors by keeping outlook

Thu Dec 9, 2010 3:29pm EST

* Analysts expected higher outlook

* Shares fall almost 4 pct

* Company expects aggressive pricing pressure (Updates with share move, details on business)

NEW YORK, Dec 9 (Reuters) - Akamai Technologies Inc (AKAM.O) disappointed investors hoping that the Internet content delivery company would raise its quarterly outlook, keeping forecasts unchanged while warning that pricing would fall.

Akamai's shares dropped 3.7 percent to $52.10 after the company outlined its long-term strategy at an investors' conference but said it was not updating its forecasts.

Some analysts say a stronger outlook for the quarter and 2011 would be crucial for the shares to hold onto their recent momentum and high valuation. The shares, as of Wednesday, were trading at around 33 times expected earnings, according to StarMine data, above the industry's median multiple of 22.8.

Analysts on average had forecast fourth-quarter revenue of around $283 million, according to Thomson Reuters I/B/E/S, above the midpoint of the company's previously stated outlook of $272 million to $285 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.

It told investors that the company expects pricing to fall "aggressively" ahead, confirming investors' fears that competition was intensifying.

But the company also said an increase in traffic would make up for the fall in pricing, and forecast annual revenue to eventually rise to $5 billion. It did not give a timeframe.

The company's shares slid last month on news it was renegotiating its contract with Netflix Inc (NFLX.O), jeopardizing its role as the movie rental company's top vendor. Netflix has brought on board rival Level 3 Communications Inc LVLT.O as one of its primary vendors. (Reporting by Ritsuko Ando, editing by Maureen Bavdek and Gerald E. McCormick)

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