If a pre-market selloff is to be believed, investors found little to like in Akamai’s
More on that in a minute. First, let’s review the numbers:
- Revenue improved 20% over last year’s second quarter.
- Normalized net profit per share rose from $0.29 to $0.34 a year ago.
- Operating cash flow fell 17% on uncollected receivables and higher expenses.
- Capital expenditures more than doubled as Akamai added more than 22,000 servers to its global network.
In an interview, CEO Paul Sagan said the outsized expenses were necessary to support the delivery of high-definition broadcasts of World Cup soccer. At the height of the event, Akamai delivered 1.6 million concurrent streams to Web-connected fans.
Think of that as the equivalent of 1.6 million people watching soccer on high-def TV simultaneously, then substitute a computer and Web browser for the tube, and you’ll get a better understanding of the load Akamai’s network was carrying.
Sagan also confirmed that Akamai now gets more than half of its revenue from value-added services related to cloud computing, e-commerce, and advertising. New company President David Kenny will run point on those services.
They’re important to Akamai’s future. Sagan said that value-added services “have great customer loyalty and very good economics.” Who wants to bet advertising has the best economics of the three?
We have plenty of ancillary evidence. Consider Microsoft
Maybe it’s unfair to lump Akamai in with this group. But Kenny, a company director who at one time was CEO of Publicis Groupe division Digitas, has street cred on Madison Avenue. He has relationships with the big firms that make ad buys, and we know Akamai wants those ads on its network.
That’s why the comparison to Google works. Like The Big G, Akamai wants a massive slice of advertising pie. In his new role, Kenny wields the cutter.
But that’s my take. Now it’s your turn to weigh in. Is Akamai behaving like Google? As an investor, does that scare you or thrill you? Let the discussion begin in the comments box below.
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