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 Akamai Technologies
So what: Revenue grew 11% to $281.9 million. Normalized earnings ran even with last year's Q3 at $0.34 a share. Both figures beat Wall Street estimates, as did Akamai's fourth-quarter revenue forecast. Management expects $303 to $315 million in sales; analysts are calling for $310.5 million.
CEO Paul Sagan also downplayed competitive threats in an interview yesterday. He's long maintained that the biggest barrier to winning deals isn't competition from the likes of Cotendo, EdgeCast, Limelight Networks
Now what: Fools will remember that I sold my shares of Akamai -- and recommended our Motley Fool Rule Breakers members do the same -- after last quarter's results showed none of the acceleration in growth Sagan and team had promised earlier in the year. Today's pop shows recent selling was overdone, but it also doesn't eliminate concerns that led me to sell in the first place.
Gross margins fell once more, down to 66.9% in Q3 from 67.6% the quarter before and 69.3% a year ago at this time. Akamai is paying for growth by booking lower-priced deals, yet revenue growth is still decelerating. Management's full-year forecast, while decent, isn't reflective of outsized demand.
Yet on a personal note, I'm very happy to see the comeback. Akamai is a good business run by good people. It just isn't a Rule Breaker anymore. Do you agree? Would you buy shares at current prices? Please weigh in using the comments box below.
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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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