Only nine companies with significant Internet software and services operations generate $1 billion in annual revenue, according to Capital IQ. Soon, we'll be able to add Akamai Technologies (Nasdaq: AKAM ) to that list.
"We believe even more confidently [we're] on track for our first billion-dollar revenue year, which is quite a milestone for the business," CEO Paul Sagan said in an interview last night.
Chief Financial Officer J.D. Sherman confirmed Sagan's prediction in a call with analysts. Sherman said to expect $1.011 billion to $1.024 billion in full-year revenue, and $1.38 to $1.41 in normalized earnings. Both estimates met Street targets.
Akamai, the Web's leading deliverer of content such as videos, music files, and corporate cloud computing data, booked $253.6 million in revenue and $0.34 in normalized per-share earnings for the third quarter. Analysts were looking for $249.7 million and $0.34, respectively.
Four years in the making
But it's the billion-dollar milestone that matters most. Sagan and his team have spent the past four years working to reach this plateau.
"There are thousands of software companies in the world. I think the number is 15 today that have $1 billion in revenue. That's the club we're going for," Sagan said at an analyst conference in October of 2006.
Now, after years of fending off low-cost competition from the likes of BitGravity, Limelight Networks (Nasdaq: LLNW ) , and even AT&T (NYSE: T ) , Akamai is poised to join that billion-dollar club. And yet, thanks to relationships with Apple (Nasdaq: AAPL ) , Netflix (Nasdaq: NFLX ) , and hundreds of others, the growth story isn't over.
"While it's still too early to predict 2011 performance, and while we traditionally haven't done so at this point, we do believe that the current Street consensus of 15% top line growth is probably a conservative estimate," Sherman told analysts.
Upon hearing that, off-hours buyers jumped in, propelling shares of Akamai up close to 3% in late trading. The stock is up almost 5% pre-market, as I write this. As a shareholder, I'm encouraged by the rally. But I also know this momentum won't last.
Ignore the profit takers
In the coming days, traders and technical pundits will urge taking profits in Akamai. They'll argue the stock has run too far, too fast, and that now is the time to lock in profits. You can always re-enter when the stock falls 20%, they'll say.
Maybe they're right, but market timing has never worked for me. And judging by history, it sometimes fails the trading superstars among us. My advice is to ignore them. Both Warren Buffett and legendary growth investor Philip Fisher have described the ideal holding period for a strong business as "forever." Akamai, on track to be debt-free before year's end and flush with $1.2 billion in cash, has rarely looked stronger.
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