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Although the stock market has improved in 2011 despite all the turmoil, some sectors of the economy still remain well off of their highs. One corner of the market where this has happened is the internet infrastructure space where most are still fighting to hit the levels they saw in late December. One of the most important firms in this space is Akamai Technologies (NASDAQ:AKAM) which reported earnings late Wednesday afternoon. Although they managed to beat earnings, AKAM posted less than impressive guidance casuing the stock to tumble by more than 15% on the day and calling into question any recovery in the space and further highlighting just how intense the competition has become.

Thanks to this report, investors will likely pay special attention to one of the few pure internet infrastructre firms in the space that is larger than AKAM, Verisign, which gave their quarterly report last night after the bell. Verisign (NASDAQ:VRSN) was expected to post earnings of 32 cents a share on $184.44 million in revenues, however, it fell far short of these expectations in its release after the market closed yesterday. The company reported a first quarter profit of just 24 cents a share on revenues of $181 million, suggesting that while they were able to meet on the revenues number, profit margins were down significantly, pushing total profits to just 24 cents a share. Fortunately for the company, many investors looked kindly upon the fact that VRSN had a one time charge of about $55 million or a level that would have bumped up the EPS to the analyst expectation of 32 cents a share [see which ETFs hold any stock with the Stock Exposure Tool].

In after hours trading, the firm was mostly flat although spikes both up and down were seen immediately following the report. Meanwhile, AKAM fell slightly after hours, further adding to its massive losses from the Thursday session and setting up the possibility of a tumultuous open for both of these companies at the start of trading today.

Due to this earnings report, as well as yesterday’s disaster from Akamai, investors should look for the Internet Infrastrcuture HOLDR (NYSE:IIH) to remain in focus throughout today’s trading session. The fund allocates a whopping 53% of the total assets while AKAM makes up a still impressive 24.2%. As a result of this heavy concentration, just six other stocks find their way into this product suggesting that IIH is extremely dependent on the fortunes of the two giants to produce solid returns for shareholders. In fact, largely thanks to Akamai’s weakness, IIH was down 4.4% on the session meaning high levels of volatility should be expected when investing in this product.

If investors are able to look past VRSN’s one time charge and buy AKAM on the dip, it could be a solid day for this HOLDR. If, however, investors take VRSN’s decline in earnings as a bad sign for the industry both stocks could sell off in Friday trading and leave IIH in a much worse position to close out the week.

Disclosure: No positions at time of writing.

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Source: Key Earnings Bring Internet Infrastructure HOLDR Into Focus