Akamai revenue up, but cost cutting continues

By Jennifer Mears
Network World Fusion, 10/11/01

Content delivery network provider Akamai Technologies reported a 57% jump in third quarter revenue compared to the same quarter a year before, but announced it would cut up to 25% of its work force in a continued effort to trim costs.

The firm, whose customers include media companies such as MSNBC, financial firms such as Morgan Stanley and entertainment properties such as E! Online, reported a net loss of $55.4 million or 53 cents per share. Revenues, however, were $42.8 million, a 57% jump over the $27.2 million in revenues reported for the same quarter a year ago.

Third quarter earnings before interest, taxes, depreciation, amortization (EBITDA) and other one-time and non-cash charges were posted at a loss of $16.6 million, notably less than the $26.5 million EBITDA loss the quarter before.

Normalized net loss for the third quarter, before amortization and other one-time and noncash charges, was $38.2 million, or 37 cents per share, beating First Call's consensus summary net loss expectation of 43 cents per share. The normalized net loss last quarter was $46.8 million, or 46 cents per share.

Akamai ended the quarter with more than 1,200 customers, including 101 using its EdgeSuite dynamic content delivery service, nearly double the 53 EdgeSuite customers the company reported the quarter before.

While Akamai has been adding customers, it also has been cutting costs. It announced it would cut 14% of its work force in April. And George Conrades, chairman and CEO of Akamai, says the additional 25% reduction announced this quarter will save Akamai some $30 million annually.

Capital expenditures, primarily in connection with network deployment and information systems, in the quarter were $14.7 million, down from $18.2 million the quarter before, the company said. Akamai ended the quarter with $239.6 million in the bank; it ended last quarter with $267.1 in cash.

During the quarter, Akamai expanded its globally distributed network to include 13,036 servers, up from 11,689 in the second quarter. Akamai's servers now are deployed within 954 networks in 63 countries including Internet backbone providers, ISPs, cable and DSL providers, and other telecommunications facilities.

Akamai forecast fourth quarter revenues to be between $34 million and $36 million, with an EBITDA loss of between $18 million and $20 million. The company said capital expenditures for the fourth quarter should drop to between $5 million and $8 million.

The third quarter earnings report is the first the company has made since its co-founder and CTO, Danny Lewin, died aboard one of the hijacked planes that crashed into the World Trade Center last month (Akamai co-founder was on doomed flight).

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