(Cue Jeff Spicoli voice.) Whoa, dude.
Most impressively, the gross margin, at 78%, was 12 points better than last year. Net margin was 21%. Think about that: $0.21 of every dollar of sales surfed through the system to the bottom line. For context, consider that tech titans Microsoft
How did investors react to these stellar results? They hammered the stock, which is down 9% since the opening bell.
Business is nevertheless going well. Among its 44 net new customers signed during the quarter, there were some awfully big names, including Mr. Softy's MSN Music store. (Akamai serves five of the top six music download stores, including Apple Computer's
Yet investors should also be aware of the potential downside. The company bluntly stated in its conference call with analysts yesterday that operating costs could go higher as the firm boosts research and development and hires more people. Plus, debt remains a concern. $281 million in convertible notes remains on the books, while total cash assets are only $71.6 million.
The good news, however, is that Akamai's free cash flow for the third quarter alone exceeded its total interest expense this year by almost $3 million. The company shows no signs of being unable to handle its obligations.
Dude, that's just gnarly. But it gets better when you consider management's guidance. Executives said that fourth quarter sales should come in between $54 million and $56 million and diluted per-share net income should be $0.09 per share. That would be slight improvement on the very fine third quarter results.
So instead of heading for the exits, investors should heed the words of Jeff Spicoli, that eminent sage and slacker: Hey, dude! Let's party.
For radically related Fool coverage:
- Fellow Fool Bill Mann wondered where a few of the titans of the bubble are now. Unsurprisingly, Akamai made the list.
- Last quarter investors fled after good earnings news. How silly.
- Sometimes it pays to go inside a proxy statement. See what I found in Akamai's.
Does the idea of surfing the serious waves of the tech world appeal to you? Then David Gardner's Motley Fool Rule Breakers is for you. A free, 30-day trial is yours for the asking.