The tech rally is real? Tell it to Akamai
Last night's second-quarter report was a disappointment. Revenue, at $204.6 million, rose just 5% year over year, falling well short of what executives and the Street expected. Per-share profit fell to $0.40 per diluted share on a non-GAAP basis, also trailing estimates, and down 2% over last year's Q2. So much for outracing the recession.
For its part, Akamai says that a major advertising deal with a retailer fell apart in the last week of the quarter, costing it $1.4 million in lost profit.
But that's one issue among many. CEO Paul Sagan told me in an interview yesterday that customer churn was once again 5%, and that Akamai was facing increased price pressure in its volume CDN business, notably in the media vertical.
If that sounds bad, it is. Media accounts for some of Akamai's best-known accounts, including Apple
Video creates a new Web star?
But is this story really as bad as it sounds? Not to Sagan. He told investors that in the long term, there's a huge opportunity in video delivery. Sagan believes Akamai's network design makes it best-positioned to serve the bulging bitrates that Web video demands.
"No matter who you ask, from the producers who make the television shows and movies to the networks and cable, satellite and telco distributors, we appear to be on the verge of a sea change that will bring a flood of new video to consumers over the Internet across three screens; PCs, TVs and smart phones," Sagan said.
Skeptics will rightly note that Google
So my money is with Sagan. Even if the market for video delivery is crowded with hungry competitors such as Limelight Networks
This is a big pie, and I expect Akamai will enjoy a sizable slice.
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Fool contributor Tim Beyers had stock and options positions in Apple and Google and a stock position in Akamai at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy likes a good stretch before its morning coffee. (Yaaawwwwwn.)