Akamai’s Forecast Tops Estimates; Kenny Resigns as President

By Brian Womack - Oct 27, 2011 5:18 AM GMT+0700

Akamai Technologies Inc., the operator of a server network that lets businesses speed data delivery, forecast fourth-quarter sales that topped some analysts’ estimates. The shares rose as much as 14 percent.

Revenue in the current period is projected to be $303 million to $315 million, the company said on a conference call today. That compares with the $310.9 million average estimate of analysts, according to Bloomberg data. Akamai also said David Kenny resigned as president and will leave the board.

Akamai, whose customers include Apple Inc., is benefiting from demand for new services, such as security protection. That may be helping to counter the impact of rising competition in its more traditional business, which lets customers more quickly transmit digital content on networks around the world.

“It’s a lot higher-margin business,” said Ilya Grozovsky, an analyst at Morgan Joseph TriArtisan LLC in New York, referring to the new offerings like security. “Ultimately, it’s a much better service for the customers. So they’re willing to pay more and they’re willing to stick with you.” Grozovsky rates the stock a “buy” and doesn’t own it.

Third Quarter

For the third quarter, revenue climbed 11 percent to $281.9 million, the Cambridge, Massachusetts-based company said in a statement. That surpassed the $279.2 million average analyst estimate compiled by Bloomberg.

Net income increased to $42.3 million, or 23 cents a share, from $39.7 million, or 21 cents, a year earlier. Profit excluding some costs was 34 cents, beating the 33-cent average estimate.

Akamai rose as high as $27.15 in extended trading. The stock rose 2.1 percent to $23.78 at the close in New York. The shares have declined 49 percent this year.

Kenny, who became Akamai’s president last year, will serve as a consultant to the company on business strategy. Chief Executive Officer Paul Sagan was given the additional title of president to succeed Kenny in that role.

The shift will leave the company without the executive who was responsible for much of its international expansion, said Donna Jaegers, a Denver-based analyst at D.A. Davidson & Co., who rates Akamai shares “buy.”

“It will leave a temporary void,” she said.

Kenny is leaving Akamai to pursue opportunities in consumer Internet, he said in the statement. Jaegers said that may point to an eventual landing at Yahoo! Inc., the Web portal that has been exploring strategic options after firing Chief Executive Officer Carol Bartz last month. Kenny is a member of Yahoo’s board.

Jeff Young, a spokesman at Akamai, declined to comment further about Kenny’s plans.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net