>Wanna place a side bet on where it goes from here? I'll bet $30+ to those lucky enough to get a fill on their IOIs.<
what, you think i'm AKAMikaze?
<vbg>
via raging bull before the repricing ...
-----
Have you been Akamaized?
IPO Snapshot 10/25/1999 2:30 PM
By Kelly Black
ragingbull.com
Company: Akamai Technologies
Expected symbol: AKAM
Expected price range: $16-$18 a share
Shares offered: 8 million
Post-offering shares: 90.4 million
Lead underwriter: Morgan Stanley Dean Witter
Internet address: akamai.com
There are companies you read or hear about and think, "Wow, that sounds like such a fun place to work." Akamai Technologies, a company that provides a high-bandwidth Internet content delivery service, is one of them for me.
The name of the game at the company's headquarters is whether you've been properly "akamaized." It's not an awful hazing initiation. It simply means that they're looking for intelligent, clever and "cool" people. Even the company's name (pronounced AH-kuh-my) is a Hawaiian word that means intelligent and clever, or more informally, cool.
With its hip attitude, the company is set to capitalize on the recent popularity of data networking products and services companies. In light of last week's stellar performance of Sycamore Networks (SCMR) and Crossroads Systems (CRDS), whose shares each closed an eye-popping 330% above the IPO price on their first day of trading, Akamai is poised for an outstanding debut.
Creativity is king
Creativity runs amok at Akamai, and it's no wonder. The founders are computer scientists and mathematicians from the Massachusetts Institute of Technology who sought to answer a challenge posed by World Wide Web inventor Tim Berners-Lee regarding Internet congestion. Their answers led them to Internet content delivery and the business model of Akamai.
In 1998 the group's business plan was selected as one of six finalists in the esteemed MIT $50K Entrepreneurship Competition, setting the creation of Akamai Technologies in motion. The company added to its roster of MIT professors and graduate students by seeking leading Internet business professionals. Among those were Paul Sagan, former president of Time Warner's (TWX) Time New Media and founder of Road Runner cable modem service, who acts as president and chief operating officer.
World Wide Wait
Akamai operates 1,475 servers on more than 55 networks worldwide, with the goal of delivering content over the Internet at optimum speed and reliability. Its target customers are companies that use the Internet to deliver products and services, and are often put at the mercy of unforeseen network congestion, the World Wide Wait. EBay (EBAY), for example, has been hit several times this year with highly publicized site crashes, which not only impacted sales but also hurt consumer confidence and public perception. Akamai aims to eliminate such problems by guaranteeing improved performance.
Its flagship product, FreeFlow, gained tremendous media attention in June when Net heavyweight Yahoo! (YHOO) signed on for broad employment of the service after noting a 50% performance increase during a trial period. Akamai also gained attention for offering an unrivaled money-back guarantee. If the customer doesn't experience 100% "up-time" for content delivered on the FreeFlow network, it does not pay. No ifs, ands or buts.
The company has strategic alliances with Apple Computer (AAPL) and Cisco Systems (CSCO) to jointly develop and market products. Apple's investment amounts to a 5% stake in Akamai, while Cisco's equals about 4%. So far, the two companies are Akamai's biggest customers, with Apple accounting for 75% its total revenue in the first half of 1999, and Yahoo accounting for 14%. Akamai's most recent partnership was with Microsoft (MSFT), whose $15 million investment equals a 1% stake in the company. Notable customers utilizing the FreeFlow system are LookSmart (LOOK), Infoseek (SEEK), Monster.com, The Motley Fool and Wine.com.
The race for speed
A key competitor and potential IPO success indicator is Alteon WebSystems (ATON), whose stock closed more than 300% above the IPO price on its first day of trading. Alteon is also in the business of speeding up the Web, but has the advantage of having been doing business since 1997, at which time Akamai was still in the research stage. In 1998 Alteon reported a loss of $10 million on $13.6 million in revenue, while revenue for Akamai totaled zero last year, with a loss of $1 million.
The first half of this year was little better for Akamai. Revenue for the six months ended in June was a mere $400,000, because commercial rollout of its FreeFlow service did not begin until April. Losses for the period were $9.7 million. Conversely, Alteon accumulated revenue of $14.6 million for the same period, with $6.7 million in losses.
The biggest thorn in Akamai's side, apart from competition, might be its offering terms. At $16 to $18 per share for eight million shares offered, Akamai hopes to raise a whopping $136 million, nearly double Alteon's offering amount of $76 million. Alteon priced at $19 per share, but only offered half the number of shares. A large float typically hampers the dramatic volatility that surrounds handsome short-term gains.
Still, Sycamore Networks bucked the trend last week. Its shares rocketed higher on the first day of trading, despite having priced a comparable 7.4 million shares at a lofty $38 each. As a fellow networking company in a hot industry, Akamai is fortunate enough to be in just the right place at just the right time. |
