Akamai forecasts revenue below estimates, shares fall

Feb 07 2013, 10:28 IST
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SummaryInternet content delivery company forecast current-quarter revenue below analysts' expectations.

Internet content delivery company Akamai Technologies Inc forecast current-quarter revenue below analysts' expectations as the company plans to wind down some media contracts, sending its shares down 16 percent.

The company expects first-quarter adjusted earnings of 50 cents to 52 cents per share on revenue of $352 million to $362 million.

Analysts on average were expecting earnings of 47 cents per share on revenue of $370.1 million, according to Thomson Reuters I/B/E/S.

The company's 127,638 servers across the world carry content for clients ranging from Facebook Inc to Netflix Inc .

"We will be winding down some contracts with a few media accounts in the first quarter that are not of long-term economic value," Chief Financial Officer Jim Benson said on a conference call with analysts.

Akamai media clients include Apple Inc, Sony BMG, News Corp, Nintendo Co and NBC.

Media and entertainment business accounted for 34 percent of revenue in 2011, down from 46 percent a year earlier.

"Revenue growth is slower (for the first quarter) because of the decceleration in the media business and the expense growth is higher due to the investment in sales force and R&D," D. A. Davidson & Co analyst Donna Jaegers told Reuters.

Akamai said it expects AT&T Inc to become a "very significant channel partner" going into 2014, but first half of the year would be "more of an investment phase".

AT&T agreed to partner with Akamai on content delivery network (CDN) services in December, and transfer its existing CDN operations, customers and services to Akamai's platform.

Akamai also said it has expanded its share repurchase authorization to an additional $150 million over the next 12 months.

"(Online activity) was not as strong as in 2011. That difference accounted for revenue shifting a bit below the midpoint of our range and a little below the expected number on the Street," Akamai co-founder Tom Leighton, who took charge as Chief Executive in January, told Reuters.

The company's net income rose to $68.3 million, or 38 cents per share, in the fourth quarter, from $60 million, or 33 cents per share, a year earlier.

Excluding items, it earned 54 cents per share. Analysts on average had expected earnings of 49 cents per share.

Revenue rose 17 percent to $378 million, but was still below the average analyst estimate of $381.3 million.

Akamai, whose competitors include Level 3 Communications and Limelight Networks, helps companies, government agencies and other enterprises increase revenue and reduce costs by improving the performance, reliability

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