50 Shares from SSB!
Akamai Ascends To New Level With IPO
By Max Smetannikov, Inter@ctive Week
October 29, 1999 10:02 AM ET
Updated: October 29, 1999 11:30 AM ET
Today is the day when content distribution is becoming a truly big-bucks business.
Shares of Cambridge, Mass.-based Akamai Technologies are expected to start trading on Nasdaq stock exchange today under the symbol AKAM. The company's initial public offering (IPO) was increased in price a second time Thursday evening to $26 per share, and is expected to be oversubscribed. If Akamai sells all of its 8 million shares at the $26 price, it will raise $208 million, putting company's market cap at $2.2 billion.
"Depending on how it goes, Akamai's valuation could be as much as $4 billion by the end of the day on Friday," said Greg Howard, a senior analyst and owner of HTRC Group. Howard and some other market watchers speculate that Akamai stock would at least double after the shares hit the market.
Indeed, Wall Street has been enthusiastic about content distributors thus far. Shares of Digital Island - a San Francisco-based Web hoster that bought out Akamai's main competitor, Sandpiper Networks, on Monday - have almost doubled since, trading at an all-time high.
Akamai's IPO makes the content distributor a hard acquisition target, since very few companies can afford a multibillion dollar investment such as Akamai.
Nevertheless, Akamai has attracted both Cisco Systems and Microsoft as equity investors thus far, and continues to be an object of close interest from a number of other companies, including Web hosters, telephone companies and content providers.
"They would be an interesting property for somebody like Sun [Microsystems] to add," said Peter Christy, principal analyst at Internet Research Group.
Akamai could be a valuable addition to vendors because it encourages Web developers to build bigger and more content-rich sites, which would ultimately increase the volume of the Internet traffic, a tide that lifts all boats. In a way, Christy said, owning a service such as Akamai would give a player such as Microsoft the same kind of leverage over the popularity of the Web - and subsequently, Microsoft products - as a Web building tool such as FrontPage did.
The IPO also gives Akamai currency to make acquisitions, mostly to enhance the bundle of content types that it can distribute to the edge of the Internet.
"There are several companies out there that have edge technology and could be a target - F5 Labs, Inktomi and WebSpective [Software] being the most visible few," Howard said.
Should Akamai gain a significant market cap, and should that cap continue to grow after today's IPO, many analysts feel the company will become one of the most exciting plays in the Internet space in general for much of the next year.
"I think Akamai might bump Inktomi from being the poster boys of Internet infrastructure business," Christy said. |
