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Akamai Shares Plunged: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of longtime Motley Fool Rule Breakers recommendation Akamai Technologies (Nasdaq: AKAM  ) fell close to 16% in intraday trading, after guiding to roughly zero sequential growth in the second quarter.

So what: First-quarter results beat expectations, but management's Q2 outlook disappointed investors. Q1 revenue grew 15% to $276 million, while normalized net income improved 9% year over year to $0.38 a share over the same period. Executives offered more of the same in the second quarter. By contrast, Wall Street had been calling for modest sequential improvements in both revenue and earnings.

Now what: Mostly, it appears that investors fear that Akamai's growth-stock days have ended. Competitive pressure from Limelight Networks (Nasdaq: LLNW  ) and AT&T (NYSE: T  ) partners Cotendo and EdgeCast are taking a toll, the bears will say.

Maybe they're right, but let's at least be patient enough to hold management to its word. In Q4, CEO Paul Sagan said growth would accelerate in the second half of the year, when the benefits of short-term pricing sacrifices made to secure long-term agreements would begin to appear.

Interested in more info on Akamai? Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. Akamai is a Rule Breakers recommendation. AT&T is a Motley Fool Inside Value pick. You can try any of our Foolish newsletter services free for 30 days.

Tim owned shares of Akamai at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.

Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 28, 2011, at 2:43 PM, GCF007 wrote:

    I think the sell off is overdone and a chance to buy a good company with upside at a great entry point. The world will need all of these players given the reality of the 21st century and all its gadgets and data needs. And, then there is always the chance of consolidation in the industry. Patience is a fools opportunity.

  • Report this Comment On April 28, 2011, at 4:55 PM, EquityBull wrote:

    Akam has no pricing power. Demand does not grow fast enough to keep up with constant aggressive price cutting. Akam story is over. the CDN biz is commoditized

  • Report this Comment On April 28, 2011, at 5:56 PM, a2badger wrote:

    Fortunately, I cashed out of my ownings of AKAM yesterday,4/27. Observed that there have been many price swings in this stock during the past three months.

    YTD most of my "cloud" investments....GOOG, AKAM, HP are down. Only winner has been RAX.

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