Akamai Technologies Inc. (NASDAQ:AKAM) is feeling some more pain today after earnings last night.  It isn’t really that Akamai dropped the ball, but they are becoming an older player that hits more singles than triples and homeruns.  Unfortunately, even on the new lows there had been so much momentum behind this in 2006 and before that shares are still not cheap. At First Call’s $1.28 target for 2007, the company trades at over 30-times 2007 EPS targets and that is after a more than $20.00 decline from this year’s highs.

Yesterday, the company posted EPS at $0.30 before items on revenues of $152.7 million.  Analysts were looking for $0.30 and $150.9 million, according to First Call.  The loose guidance also only looks in-line.

The company added 74 customers to a net 2,555 at the end of the quarter.  Akamai’s customers tend to be somewhat high bandwidth users that wish to physically and geographically store some of the high-bandwidth media files closer to each client’s download end-users.  The huge rise in media sites and more content was the catalyst, but it makes you wonder if Web 2.0 is starting to be concentrated to more of a handfull of players rather than thousands of content providers.

When you look at the 9% drop in shares of Level 3 Communications (NASDAQ:LVLT)after its earnings, you really have to wonder where that comingbandwidth shortage is.  It really would make you think that all theboost Web 2.0 traffic and bandwidth is going to fewer and fewerplayers.  Maybe all the lower bandwidth and compression technologiesthat have come out over the last year have some consequences. 

Akamai has been downgraded this morning so far by Jefferies, Credit Suisse, and Merriman Curhan Ford.  Friedman Billings Ramsey is probably wishing it could take back that "Outperform" rating it issued just last week.  Yesterday evening shares were down only about 7%, but shares are now down almost 18% after the open.  the previous 52-week low was $41.02, so this marks another clear breakdown.

Jon C. Ogg
July 26, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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