Notes From Akamai (AKAM) Presentation at Wells' TMT Conference

Tom Barth, Akamai Technologies (NASDAQ: AKAM) Head of IR, presented at the Wells Fargo Securities TMT conference in NYC on Wednesday, 11/11. He discussed the moderation of traffic growth, the impact of staggered software rollouts, and OTT video.

AKAM faces near term headwinds due to a moderation in traffic growth but the company remains optimistic on the potential for various emerging OTT video streaming efforts to materialize longer term and drive improved growth in the Media Delivery segment.

AKAM's Q3 media delivery growth moderated due mainly to a smaller benefit from software downloads, social media and gaming releases from 2014 levels.

When larger customers introduced a new software update in Q3'14, it was pushed out to all customers at roughly the same time which created a spike in traffic beyond the DIY (Do-It-Yourself) capabilities of AKAM's customers. This created a benefit as AKAM was able to deliver the excess traffic. However, in Q3 AKAM saw customers with DIY capabilities push out large software updates on a more staggered basis which allowed customers to handle a greater share of the traffic with their internal delivery networks.

While some initiatives that AKAM thought would take place have been pushed out, the company remains confident they will eventually occur in 2016 and stressed that they would not have spent the capex in 1H'15 if they did not have visibility on higher traffic volumes at some point.

AKAM continues to think its long term base case growth rate in the Media Delivery business is 15%/yr.

AKAM's Security business grew 44% on a constant currency basis in Q3’15. Security may only be 10% of AKAM’s revenue today but it accounts for 30% of AKAM’s growth. In addition, AKAM’s web application firewall (WAF) product is gaining momentum while domain names services (DNS), IP reputational analysis, threat intelligence and newly acquired secure web gateway products could be additional growth drivers.

The firm maintained a Market Perform rating and $61-$66 valuation range

For an analyst ratings summary and ratings history on Akamai Technologies click here. For more ratings news on Akamai Technologies click here.

Shares of Akamai Technologies closed at $61.42 yesterday.

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