RealTime IT News

Akamai Beats Street, Cuts Staff, Office

Akamai Technologies , a Cambridge, Mass., content delivery network operator, posted narrower third quarter losses but will cut up to a quarter of its staff in pursuit of profits.

Akamai's encouraging results come at the start of an important earnings season that could signal whether the technology sector, and the economy as a whole, will break out of its prolonged slump.

"We delivered very strong financial performance in a difficult quarter," said George Conrades, Akamai's chairman and CEO.

Normalized net loss, before charges, was $38.2 million, or 37 cents a share, compared to the 43 cents expected by First Call/Thomson Financial. Revenue grew to $42.8 million, up 57 percent from $27.2 million in the same period last year. Akamai's finished the quarter with about $240 million in cash.

The revenue surge comes from new government contracts, expanded business with large companies and resellers and an uptick from companies who turned to Akamai to relieve heavy traffic Sept. 11. The firm continues to reduce its dot-com customers, which now make up about 15 percent of business.

Akamai's job cuts, totaling about 200 positions, include telesales jobs. Cold-calling was an effective way to reach dot-com and smaller companies but for large companies, direct sales and resellers work better, the company said. Other measures include the closing of Akamai's San Diego office. In all, the moves will save $30 million annually.

Looking forward, Akamai , is anticipating fourth-quarter revenue of $34 million to $36 million. The target factors in a restructured license agreement with Sockeye Networks, a Newton, Mass., intelligent router startup.

Akamai, a Sockeye investor, has been receiving about $4 million a quarter from the pact. But because of Sockeye's need to conserve cash, Akamai will now take a percentage of licensing revenues, with a $250,000 quarterly minimum.

Other potential drags on revenue include the overall economic slowdown, the uncertainty of Akamai reseller Exodus, which recently filed for Chapter 11 bankruptcy protection, and customer churn in the low-end of its customer base.

Shares of AKAM were up in pre-open trading. In the last 52 weeks, the issue has ranged from 2.52 to 60.