February 9, 2016 / 9:12 PM / a year ago

Akamai beats revenue estimates; unveils $1 billion share buyback plan

3 Min Read

(Reuters) - Online content distributor Akamai Technologies Inc reported better-than-expected quarterly revenue, helped by higher demand for its security services, and announced a $1 billion share buyback program.

Akamai's shares rose 16 percent to $45.90 in after-hours trading on Tuesday.

The upbeat results soothed investors' nerves after a selloff in the broader tech sector in the past few days, which was triggered by disappointing sales outlook from LinkedIn Corp and Tableau Software.

"We had a good holiday shopping season. We had continued strong growth in our security business and that helped us to come in little above the top range of guidance," Chief Executive Tom Leighton told Reuters.

Revenue from the company's fast-growing performance and security business, under which it offers cloud security products and helps businesses provide Internet content at greater speed, rose about 16.4 percent to $286 million.

The cloud security business, which protects websites and other Internet applications against hackers, recorded a 46 percent jump in quarterly revenue.

Internet traffic typically surges in the holiday season and several retailers, including Best Buy Co Inc, Urban Outfitters Inc and IKEA, use Akamai's services.

Akamai is also planning to launch its first enterprise security product in late 2016, which will detect and prevent malware, and data theft attacks against enterprises.

Revenue in the media delivery solutions business, which helps customers deliver Web content including videos, fell 1.8 percent to $247.1 million.

The business was hurt by loss of revenue from its two largest accounts, which have comprised about 13 percent of total revenue over the last few years, the company said.

"The rest of the (media delivery solutions) business grew at a healthy clip and has lot of potential for future growth," Leighton said.

Additionally, on a call with analysts, Leighton said he plans to buy $10 million in Akamai shares in the next six months.

Akamai forecast an adjusted profit of 61-64 cents per share and revenue of $554 million-$570 million for the current quarter.

Analysts on average were expecting earnings of 61 cents per share and revenue of $567.1 million, according to Thomson Reuters I/B/E/S.

For the fourth quarter ended Dec. 31, net income fell 9 percent to $88.4 million, or 49 cents per share.

Excluding items, Akamai earned 72 cents per share, beating the average analyst estimate of 62 cents.

Revenue rose to $579.2 million from $536.3 million, above the average estimate of $568.7 million.

Reporting by Kshitiz Goliya and Supantha Mukherjee in Bengaluru; Editing by Anil D'Silva and Saumyadeb Chakrabarty

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