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Akamai Beats the Street as CEO Bids Farewell

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Last quarter, Akamai Technologies (Nasdaq: AKAM  ) jumped 14% overnight thanks to a stellar fourth-quarter report. Tonight, the provider of online content delivery and cloud computing services delivered another fine report to cement its place on that share-price plateau.

Still, shares lost 7% in after-hours trading on the news that Akamai met Wall Street's revenue targets while beating earnings estimates. Sales landed at $319 million, and non-GAAP earnings declined 10% year-over-year to $0.24 per share.

CEO Paul Sagan pins the strong performance on customers hooking into his cloud computing and rich media delivery services. That's no surprise; Akamai is one of several content delivery partners for media powerhouse Netflix (Nasdaq: NFLX  ) , which reported 2 billion hours of video streaming in the last quarter of 2011 and stayed on a healthy growth trend in the new year.

If other media clients mirror the Netflix experience, there will be no shortage of opportunity for Akamai and its major frenemies. Both Level 3 Communications (Nasdaq: LVLT  ) and Limelight Networks (Nasdaq: LLNW  ) report earnings next week; dig into Akamai's conference call and those upcoming reports for a clearer picture of the moving parts of this market.

In other news, Akamai reupped its share repurchase program to keep dilution from stock-based compensation under control. The number of fully diluted shares has actually declined by 4.8% over the last year, so management isn't entirely opposed to overshooting the stated targets.

Oh, and Sagan also took this opportunity to announce his retirement. The former TV content producer and cousin of popular science writer Carl Sagan isn't being rushed out the door -- he'll stay on until his replacement has been chosen, installed, and comfortably settled, potentially until the end of 2013. Sagan served at Akamai for 15 years, and his replacement should be someone with "direct experience in building multibillion-dollar, cloud-based businesses," according to lead independent director Martin Coyne. That's a tall order to fill.

Akamai's shares have delivered market-beating results this year even though investors seem disappointed tonight. That's impressive, but Foolish analysts have found an even more promising stock for your portfolio in the new year. Learn all about The Motley Fool's Top Stock for 2012 in a special report -- free for a limited time.

Fool contributor Anders Bylund owns shares in Netflix but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. Motley Fool newsletter services have recommended buying shares of Netflix. The Motley Fool has a disclosure policy.

We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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

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 25, 2012, at 10:23 PM, GrumpyOldGuy wrote:

    Well, aren't we the "Look at the bright side" writer today.

    It looks to me like everyone else is bummed about future guidance.

  • Report this Comment On April 26, 2012, at 5:43 AM, TMFZahrim wrote:

    This story was written before guidance was issued in the conference call, Grumpy. Markets move fast sometimes.


  • Report this Comment On April 26, 2012, at 7:26 AM, lucasmonger wrote:

    My how fickle the market is. A long-time sell order got triggered after hours last night and I was perplexed about why since I look at the stock price and it's not even close, this article plus comment confirms why - stock price climbs during the conference call, then plummets because of the guidance.

    I still agree with Anders (this time - many times he say things that I don't agree with) that all the major AKAM frenemies stand to do well as more and more people ditch their cable and satellite and go to streaming. So for people who are truly long-term investors, it looks like shooting fish in a barrel if you're willing to be patient and ignore the day to day wall street churn.

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