October 28, 2009 / 8:26 PM / 10 years ago

UPDATE 4-Akamai shares jump on strong results, outlook

* Q3 EPS excluding items $0.38, beats Street view $0.35

* Q3 revenue $206.5 mln, exceeds Street view

* Q4 rev, EPS outlook also exceed Street view

* Akamai says conducting internal probe on insider trading

* Shares jump 10 pct after-hours (Adds CEO comments, details on insider trading probe)

By Ritsuko Ando

NEW YORK, Oct 28 (Reuters) - Akamai Technologies Inc’s (AKAM.O) quarterly results and outlook topped Wall Street forecasts, helping to dispel concerns about lower pricing and lifting its shares 10 percent.

The company also said it had begun an internal investigation after an unnamed executive was implicated in a massive insider trading scandal. [ID:nN28317518]

Akamai, which helps companies deliver Internet content smoothly by navigating less congested routes over the Web, forecast fourth-quarter revenue of $217 million to $224 million, higher than the average Street estimate of $214.6 million, according to Thomson Reuters I/B/E/S.

Its third-quarter revenue also exceeded forecasts, rising 5 percent from a year earlier to $206.5 million, compared with the average Street estimate of $199.4 million and the company’s own forecast range of $195 million to $203 million.

Chief Executive Paul Sagan said the strength came from both its traditional media clients as well as its growing e-commerce customers.

“We saw better-than-expected growth in both key segments. We continue to see strong traction for our value-added service around commerce ... but we also saw it on our media side,” Chief Executive Paul Sagan told Reuters in a phone interview.

Apple Inc (AAPL.O) and News Corp’s (NWSA.O) MySpace use Akamai’s services to deliver online music and videos to consumers. Akamai has also been trying to expand sales to companies building e-commerce businesses.

Third-quarter net profit fell to $32.7 million from $33.4 million a year earlier, although it was unchanged per share at 18 cents. Excluding special items, earnings per share fell to 38 cents per share from 40 cents a year earlier, but was higher than Wall Street’s average forecast of 35 cents.

For the current quarter, Akamai forecast earnings excluding items of 39 cents to 41 cents, compared to the average analyst forecast of 38 cents.

Akamai shares rose 9.9 percent to $22.16, after closing at $20.16 on Nasdaq.


The results come amid concerns of slower revenue and growing pricing pressure, as competition mounts not only from traditional rivals like Limelight Network Inc (LLNW.O) but also from new market entrants like AT&T Inc (T.N).

Sagan acknowledged the company had been aggressive on pricing to support sales, although he said this was a continuation of its strategy to gain more customers. Akamai said customers increased 8 percent from a year earlier to 3,031 by the end of the third quarter.

“We’re leveraging our cost advantage to help our media clients drive greater volumes over our network, through more and more video programming at higher and higher levels of quality,” he said.

He forecast more incremental adoption of demand for high-definition online video entertainment, which drives Internet traffic and thus Akamai sales.

Sagan also addressed the insider trading case for the first time since federal investigators said on Oct. 16 that an Akamai executive previously passed on information about the company’s earnings outlook, helping Galleon Technology Funds profit.

No Akamai official has yet been named or charged in the case, and Sagan said the company has not been notified by law enforcement of any wrongdoing. The company has offered assistance to authorities, he said.

“If we are able to determine that somebody in Akamai Technologies has done something wrong, we will take swift and appropriate action,” he said on a conference call with analysts following the company’s quarterly earnings announcement.

Galleon founder Raj Rajaratnam and five others, including a senior executive from IBM (IBM.N), were charged in the case. (Reporting by Ritsuko Ando; Editing Bernard Orr)

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