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To: Mark Fowler who wrote (117943)	2/16/2001 4:49:52 PM
From: GST	Read Replies (1) \| Respond to of 164684

Ah Mark, perhaps. But I am happy for the moment -- we will see.

To: Mark Fowler who wrote (117943)	2/16/2001 6:43:35 PM
From: Glenn D. Rudolph	Respond to of 164684

Akamai Technologies, Inc. – 25 January 2001 2 Fundamentals Keep Getting Stronger – Upgrade Long Term Opinion to Buy We are upgrading our l.t. opinion on AKAM to a Buy rating from Accumulate. The company posted an impressive quarter across the board in a difficult market environment. We believe these results lend credibility to a strong ’01 outlook. We are raising our ’01 expectations to $225M from $190M to account for AKAM’s new revenue streams. Our new estimate falls short of the $245M consensus due to our concerns over IT spending this year. However, as the take-up of value added services materializes during the year, we will evaluate the potential for additional upside. We Upgraded AKAM for Five Factors 1. Widening Competitive Lead: We believe AKAM has widened its lead in the static content distribution game with over 80% market share, an insurmountable lead in servers deployed, and an impressive list of quality customers. 2. Rapid Core Growth: AKAM grew revenues 37% this quarter in a very difficult market environment. While others in the IIS space, such as Inktomi, Exodus, and USi, lowered expectations for next year, AKAM raised ’01 guidance on the strength of its expanding platform of services and revenue opportunities. 3. Continuing New Service Introduction: The company has not missed on its promise to add at least two new services each quarter. Moreover, with each quarter, the company expanded its breadth of service, the capabilities of its platform, and the role the edge plays in the Internet architecture. In Q4, AKAM introduced perhaps its most compelling new value added service, EdgeSuite, for dynamic web page assembly on the edge. 4. Improving Margins: For the fourth consecutive time, AKAM slightly improved gross margins, reaching 36% in Q4, up from 33% in Q3. We believe that AKAM is positioned for continued margin expansion as network and server utilization increase and higher margin value-added services gain traction. 5. Strong Reseller and 3 rd Party Adoption: We think AKAM has one of the most aggressive sales forces in the IIS space. The company has built on top of that a reseller corps that expands distribution worldwide and significantly contributes to revenue. AKAM reported that its indirect channel constituted 17% of revenues in Q4, up from 15% in Q3 – done again in a tough market. Key Highlights from Q4 $37.2M in revenues, representing 36% sequential growth but only 2% ahead of our estimate of $36.4M. 222 new recurring customer adds, bringing the total to 1,337 but staying flat to Q3’s output of 220 new adds. Customers took 1.6 services in Q4, up slightly from 1.5 in Q3 and representing 100 units gained in the quarter. Monthly ARPU came in at $8,350, up from $8,000 last quarter. Monthly churn rose to 1.4% from AKAM’s typical 1.0% rate in part to the dot.com meltdown. Gross Margin improved to 36% from 33% in Q3 and 30% in Q2. EBITDA Loss of ($47.7M) this quarter beat our estimate of ($52.5M) by 9%. This quarter marked the first decrease in EBITDA losses, accomplished one quarter ahead of schedule. We still project breakeven by Q3 ’02. EPS Loss came in at ($0.61) or 9% ahead of our ($0.68) estimate. $35.2M in CapEx, down from last quarter’s $40.5M mark. This quarter marked the fourth consecutive downturn in CapEx as percentage of revenues. Network Deployment extended to 8,000 servers, an increase of 1,940 over last quarter, over 460 networks, up from 335 last quarter, and 54 countries, up from 35 last quarter. Raising Outlook for 2001 We are raising our ’01 revenue estimates to account for AKAM’s new revenue streams and for the continued solid growth in core revenues. We believe the company can meet our new ’01 estimates based on a continuing increase in the amount of traffic on the AKAM network. We have raised our ’01 revenue estimate to $225M, up from our previous estimate of $190M. Our new estimate is below current consensus of $245M to reflect our continued concern over IT spending in ’01, but also leaves room for further increases. We are now projecting ($164M) in EBITDA loss, a significant improvement to our previous estimate of ($191M) but still below consensus ($140M). For Q1 ‘01, we raised our revenue estimate slightly to $45M from $42M, representing 20% sequential growth over Q4’s $37.2M. For Q1 ’01 EBITDA loss, we are now projecting ($45M), up from our previous estimate of ($53M). Valuation / Outlook We maintain our 12-18 month price objective of $54 based on 17x 2002E revenues. AKAM currently trades at 22.6x estimated ’01 revenues and 11.3x ’02E revenues. Overall, we continue to believe that Akamai will maintain a leadership position in the Content Delivery arena and it is making good progress in establishing a clear path to profitability.