April 28, 2011
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.
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