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Outside investors may not have liked Akamai's (Nasdaq: AKAM ) second-quarter results, but insiders loved them. Company president David Kenny and CEO Paul Sagan bought into a sell-off, combining to purchase 40,000 shares last week at prices between $38.78 and $39.52 a share.
Why buy at these levels? Neither executive was obligated to purchase anything. Unlike McDonald's (NYSE: MCD ) , Duke Energy (NYSE: DUK ) , and Gap (NYSE: GPS ) , Akamai has no minimum stock ownership requirements for its executives. Kenny and Sagan seem to be buying because they sense a bargain, and they may be right.
Bigger and faster
Akamai improved revenue 20% in Q2, as its closest competitor, Limelight Networks (Nasdaq: LLNW ) , improved its top line by 17%. Bigger is still better in the web content delivery business.
Akamai also kept gross margin greater than 70% and produced $20 million in free cash flow in its most capital-intensive quarter in a decade. The company spent more than $66 million to expand its network, which now stands at more than 73,000 servers deployed worldwide.
Sagan's and Kenny's buying suggests that the network will continue to get bigger, in an effort to accommodate still more videos, tunes, and software. The natural result? Earnings growth. Big earnings growth. As Sagan said during last month's conference call with analysts:
Online video is creating real business opportunities for customers as we have continued to serve increasingly large online audiences and set records for peak traffic every quarter, there's little doubt that the migration online is happening at an accelerated pace.
Now he's putting his money where his mouth is. Do you think he's right, or is his buying just a bid for attention? Let the debate begin in the comments box below.