Akamai Gains on Strong Earnings

Shares of Akamai (AKAM) surged higher today, boosted by a strong earnings report and evidence that concerns about price wars in the content delivery market are overblown. Akamai shares rose $2.68 to close at $32.41, a gain of 9 percent on the day.

On Wednesday Akamai reported that its annual revenue grew 48 percent in 2007, with revenues of $636 million for the year. Despite growing competition in the CDN market, customers are spending more money with Akamai, with average revenue per customer up 12 percent from the previous quarter and 22 percent from the year-earlier period. Akamai now has more than 100 customers who spend more than $1 million a year on its services.

Akamai customers are spending more because their businesses are growing. “As more and more entertainment content and games are going online, it drove really tremendous results for us,” President and CEO Paul Sagan said during Akamai’s earnings call with analysts. “We saw it across many verticals, but the two most important were e-commerce and the media and entertainment, even beyond expectations. I think that we are seeing a steady growth of entertainment content moving to an IP world. I just think you continue to see adoption of the Internet and it creates this virtuous spiral upwards right now.”

Akamai-Limelight Suit Streamlined

Dan Rayburn at the Business of Online Video reports a development in the patent infringement lawsuit between Akamai (AKAM) and Limelight Networks (LLNW), the two leading players in the content delivery network business. Dan says the court has streamlined the case, issuing a preliminary ruling focusing on a single Akamai patent, effectively setting aside issues related to two other patents. We’ll update once more information is available.

Akamai: 1M Social Media Requests a Second

Akamai Technologies (AKAM), the leading content delivery network, said today that traffic from social media sites on its platform now exceeds more than 1 million requests per second. The new data was included in a press release from Akamai touting the growth of its social media business. Akamai works with a lengthy list of leading social media destination sites, including Facebook, MySpace, Bebo, Friendster and Metacafe.

Akamai said several of its fastest-growing customers are not the social networks themselves, but content providers creating widgets that are distributed on Facebook, MySpace or other social networks. One is Slide, which is the leading application provider on Facebook with more than 50 million unique users each month. The company’s popular widgets include Slideshows, FunWall and Super Poke.

“Traffic to the Slide network has grown more than 500 percent this past year,” said Ken Brownfield, Director of IT at Slide. “Our already heavily-tuned load times were decreased by an additional 50 to 75 percent by utilizing Akamai, which is critical for an ideal user experience.”

Report: Akamai To Announce P2P Service

Here’s an interesting example of how a blog post can uncover information about a widely-followed public company: Yesterday Dan Rayburn wrote a post titled “Is Akamai Announcing a new P2P Delivery Service Next Week?” The post addressed speculation that Akamai (AKAM), the leading content delivery network, was set to unveil an attention-getting new service during its company analyst summit.

Within hours, Dan had heard from several Akamai customers saying the company is issuing invitations to a Nov. 6 event announcing the launch of the P2P delivery service.

In its quarterly analyst call yesterday afternoon, Akamai president and CEO Paul Sagan was asked about the reports of a P2P offering. Sagan noted that Akamai has been public about its interest in the peer-to-peer market (which Akamai refers to as “client delivery”) but “we don’t have any product or service announcements to make right now.”

Akamai’s Leighton on CDN Competition

Sramana Mitra on Strategy has an interview with Tom Leighton, the co-founder and Chief Scientist at Akamai Technologies (AKAM) in which Leighton discusses how Akamai is positioned to benefit from growth in the online video, as well as the recent competition from Level 3 and other new CDN providers.

As we noted recently, Akamai’s approach to competition has been to invoke the superiority of its network and edge-based approach to content delivery. Leighton goes into some on this point:

I think there have always been companies doing the core data center approach. It is easy to do. You buy servers, stick them in a data center, give it transit. You can start a company very easily with that model. There are probably two dozen companies, a dozen of which started in the last year, doing just that. It is quick, dirty and cheap. You then find out your quality is not good … If you are trying to deliver video from the data centers, say 20 data centers around the world, for a lot of the end users, you won’t even be able to deliver TV quality, let alone DVD or HD.

Leighton says one of Akamai’s key advantages is its relationships with hundreds of ISPs that house Akamai servers on their networks.

Analysts Warm to Akamai After Rebound

Shares of Akamai (AKAM) have rebounded this week after the company announced a new service to help enterprises deliver business applications. Akamai closed Wednesday at $37.13 a share, a gain of 23.7 percent from its close of $30.01 last Thursday. The improvement has prompted support from some securities analysts, who have been concerned that Akamai might be hurt by competition in the content delivery network (CDN) market from rivals including Limelight Networks (LLNW) and Level 3 (LVLT).

On Wednesday American Technology Research analyst Rob Sanderson started coverage of Akamai with a buy rating, advising clients to buy the stock ahead of earnings on October 24. “We think fundamentals are not as bad as feared and expect guidance will be in-line or better than current consensus,” a combination he thinks can provide a catalyst for the stock, according to Barron’s Tech Trader Daily.

Baseball Playoffs Boost Akamai Shares

Why is the stock of content delivery network Akamai (AKAM) surging today? Akamai shares are up $2.22 (7.8 percent) to $30.97 a share, apparently because Wall Street traders see benefits for Akamai’s bottom line in strong traffic at MLB.com . Nearly 3 million people accessed the video stream of Monday’s one-game National League wildcard playoff game between the San Diego Padres and Colorado Rockies on MLB.TV, which uses Akamai for its streaming media delivery.

September’s tight pennant races generated huge traffic for MLB.com, which had more than 2.7 billion page views and 61 million unique visitors for the month, according to Major League Baseball. That will be welcome news to Akamai shareholders. Unless they’re also Mets fans, in which case they’re probably still inconsolable.

Akamai Dips on Analyst Pessimism

Shares of Akamai Technologies (AKAM) are lower today after an analyst issued a “sell” recommendation on the stock, saying competitors were likely to erode a key revenue niche for the content delivery network (CDN) market leader. Shares of Akamai closed at $30.37, down $1.89 for a drop of 5.9 percent on the day.

Kaufman Brothers analyst Sameet Sinha said that the competitive dynamics in the CDN market are ready to change. “There is an influx of new entrants into the space, especially in the media and entertainment” segment, which makes up 40% of Akami’s sales, Sinha wrote in a research note. Factors include the recent entry of newcomers EdgeCast and Panther Express, the IPO of Limelight Networks (LLNW) and the launch of a CDN offering from Level 3 (LVLT).