Tuesday, May 17, 2011

Akamai - a jewel on sale

A slight slowdown in the rate of revenue growth and the emergence of the small cap cloud competitors has led to a fall in Akamai's stock price in the last six months from $54 to $32. That's a collapse, leading to a current market cap of around $6 billion.

Akamai claims that 20% of the world's internet traffic is delivered over its platform. It has 84,000 servers in 72 countries. The firm has $2.2 billion in shareholders equity and no long term debt. The operating margin is running at around 25%.

Given the prices being paid for properties by technology titans, Skype being a recent example, Akamai must be in the crosshairs of some major firms with cash to put to work. I would expect an offer price at around $44 for this exceptional property. Granite countertops, Sub-Zero, outdoor patio with built in grill and fire pit, it's got it all, you don't need to do a thing, just move in.

Seriously, Akamai must be at the point of being in play or at that threshold. Synergy would hardly be necessary, but there would inevitably be opportunities on both the cost and revenue side at some of the majors and this would only make the deal more valuable. Let's watch.


Anonymous AKS said...

Akamai is being quickly relegated to legacy status by the innovative new cloud specialists like Rackspace. They are taking the high margin business and leaving Akamai as a utility. What this suggests is that Akamai needs to be acquired to broaden its clout and give it a huge capital advantage against the new competition. With this need shareholders should be willing to accept a modest premium to market in a stock deal and get on with it. The competitive landscape has shifted right out from under AKAM as quick as a landslide.

2:13 PM  
Anonymous Anonymous said...

Akamai's cost of goods sold is a combination of their server farms and the intellectual capital required to constantly create new and improved algorithms for web interfaces. It is almost impossible for a lay investor to know whether their computer science expertise is somehow waning. If their MIT base of brilliance is still strong, the case for Akamai is still compelling, as in what a "buy".

3:05 PM  

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