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Akamai: The Stock Is Getting Akamaized

In July, Akamai (which means "cool" in Hawaiian) was a seemingly cool investment, trading between $120 to $130. Since then, the stock has been like a surfer that had a very bad wipeout.

But yesterday there were signs that the big fall in the stock price was an overreaction. In fact, the stock rode the waves of Nasdaq, climbing $12-27/64 to $52-51/64.

And I think there is more upside. Basically, the company has an incredibly useful technology - and it is in high-demand.

The company had its genesis in a hotbed of innovation: the Massachusetts Institute of Technology (MIT). You see, the inventor of the World Wide Web, Tim Berners-Lee, saw a big problem in early 1995. That is, the Internet was in jeopardy of becoming highly congested. So, he posed a challenge to the MIT faculty to find a solution. Tom Leighton, a professor of Applied Mathematics, took the challenge and analyzed the current Internet infrastructure. He devised complex algorithms to greatly enhance the speed of content delivery.

From there, the company was able to get funding and go public. The stock was a high-flier.

But over the past few months there have been concerns. First of all, there is potential competition. Related to this, of course, is the problem of downward pricing.

But so far, Akamai has a clear technology advantage. While there will likely be downward pricing, this should be offset by the huge volumes of Internet traffic using Akamai's solutions.

Yesterday, Akamai announced its earnings reports. By all accounts, there appears to be no let-up of the company's hyper growth. Revenues soared 50% sequentially to $27.2 million. So far this year, the company has generated $52.5 million in revenues. In the past quarter, the customer count increased from 2,100 to more than 2,800. The number of recurring customer contracts was at 1,115.

Akamai is a classic example of a first-mover that knows how to keep its lead. In the past quarter, the company had over 6,000 servers spread across 54 countries. What's more, the company launched two new services.

Such investments in infrastructure and R&D are crucial, since the market opportunity is enormous. Yes, I think this will, once again, become a cool investment.