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Akamai Technologies Inc. (NASDAQ:AKAM)

Q3 2007 Earnings Call

October 24, 2007 4:30 pm ET

Executives

Sandy Smith - IR

Paul Sagan - President and CEO

J.D. Sherman - CFO

Analysts

Todd Raker - Deutsche Bank

David Hilal - Friedman, Billings,Ramsey

Aaron Kessler - Piper Jaffray

Mark Kelleher - Canaccord Adams

Michael Turits - Raymond James

John Walsh - Citigroup

Tom Watts with Cowen &Company

Colby Synesael - Merriman Curhan

Harry Blount - Lehman Brothers

Rod Ratliff - Sanford Group

Darren Aftahi - ThinkEquity

Tim Klasell - TWP

Rob Sanderson - AmericanTechnology

Operator

Good afternoon. My name is Kaylaand I will be your conference operator today. At this time, I would like towelcome everyone to the Akamai Third Quarter 2007 Earnings Call. All lines havebeen placed on mute to prevent any background noise. After the speakers remarksthere will be a question-and-answer session. (Operator Instructions).

Thank you. Ms. Smith, you maybegin your conference.

Sandy Smith

Thank you. Good afternoon everybodyand thank you for joining Akamai's investor conference call to discuss ourthird quarter 2007 financial results. Speaking today will be Paul Sagan,Akamai's President and Chief Executive Officer; and J.D. Sherman, Akamai'sChief Financial Officer.

Today's presentation containsestimates and other statements that are forward-looking under the PrivateSecurities Litigation Reform Act of 1995. These statements are based on currentexpectations and assumptions that are subject to risks and uncertainties andinvolve a number of factors that could cause actual results to differmaterially from those forward-looking statements. Additional informationconcerning these factors is contained in Akamai's filings with the SEC,including our Annual Report on Form 10-K.

While we may elect to updateforward-looking statements at some point in the future, we specificallydisclaim any obligation to do so, even if our estimates change, and thereforeyou should not rely on these forward-looking statements as representing ourestimates as of any date subsequent to today.

During this call, we will bereferring to some non-GAAP financial measures that we believe are helpful to abetter understanding of our financial results and operations. These non-GAAPmeasures are not prepared in accordance with Generally Accepted AccountingPrinciples. And you can find definitions of these non-GAAP terms andreconciliation to these non-GAAP terms to the most directly comparable GAAPfinancial measure under the news and publications portion of the Investor Relationsection of our website.

Now, let me turn the call over toPaul. Paul?

Paul Sagan

Thank you, Sandy. And thank you all for joining ustoday. Q3 was another record quarter for Akamai with strong revenue and earningsgrowth. Financial highlights for the third quarter include revenue of $161.2million, a 6% increase over the second quarter and a 45% increase over the thirdquarter of last year.

Normalized net income of $62.4million, or $0.34 per diluted share, that’s a 13% sequential improvement and a49% increase over normalized net income from the same period last year. Inaddition to these strong financial results, we were very excited about of thelaunch of a number of new initiatives and relationships.

We were delighted to announce ourexpanded partnership with Starbucks and Apple to launch the first in-storedelivery service for online entertainment content. We also extended ourcommitment to the B-to-B market with the launch of a comprehensive managedservice that accelerates the performance of any IP based application across theInternet.

I will be back in a few minutes totalk more about these projects, dropping some thoughts about the latest trendswe are seeing across the business. But now let me turn it over to J.D. toreview our third quarter results in detail. J.D.?

J.D. Sherman

Thanks Paul. As Paul justhighlighted, we had a very solid third quarter with revenue growing 6%sequentially and 45% year-over-year to $161.2 million. As expected, weexperienced some seasonality in the summer month, but a strong pick-up inSeptember got us to the high-end of our revenue range.

During the third quarter, Akamai'sinternational sales represented 23% of total revenue consistent with second quarterlevel. Resellers represented 18% of total revenue, two points lower than theprior quarter. We added 61 net new customers in our target market this quarter,bringing our total customer count to 2,616.

As we invest in our sales andsolutions our primary focus is on attracting and retaining high-value customersthat will grow with Akamai.

We focused on the overall qualityof new signings rather than the volume of signing. We've also continued toexpand the relationships we've build with leading companies across all segmentsof our business. Our consolidated ARPU or average revenue per customer grewagain to $20,600 in the third quarter up 3% over our second quarter ARPU and18% higher than the same period last year. Once again, no customer accountedfor 10% or more of our revenue in the quarter.

Our GAAP gross profit margin,which includes both depreciation and stock-based compensation, was 73% for thequarter, about a point lower than Q2. And cash gross margins were 82% down,about 0.5 point than last quarter. These results put us on track to deliver onour full year gross margin guidance that we gave you in July.

GAAP operating expenses were$81.7 million in Q3 slightly below the prior quarter. These GAAP numbersinclude depreciation, amortization of intangible asset, and stock-basedcompensation charges. Excluding these non-cash charges, our operating expensesfor the quarter were $60.5 million, also slightly down from the prior quarter.

Adjusted EBITDA for the thirdquarter was $71.9 million is up 10% from the prior quarter, and up 54% from thesame period last year. Our adjusted EBITDA margin was 45% up two points fromthe second quarter and up three points over the same period last year.

Total depreciation andamortization for the third quarter was $19.2 million up from $17.6 million inthe second quarter. These charges include $14.1 million of network relateddepreciation, $2.3 million of G&A depreciation, and $2.8 million ofamortization of intangible asset. Net interest income for the third quarter was$5.9 million.

Moving on to earnings, GAAP netincome for the quarter was $24.3 million or $0.13 of earnings per dilutedshare. As a reminder, our GAAP net income includes non-cash charges for stockcompensation related to FAS-123R and book tax charges at an effective annual rateof 41%. However, because of our significant deferred tax asset, we expect topay cash taxes at an annualized rate of only about 2%.

During the third quarter, ourstock-based compensation expense was $16.9 million or $0.09 per share on a pre-taxbasis. A breakdown of our stock-based compensation charges by operatingdepartment is available on the supplemental metrics sheet posted on the InvestorRelations section of our website.

Additional non-cash items, andGAAP net income for the quarter, include $2.8 million from amortization ofintangible asset, and $17.8 million non-cash tax charge. Excluding thesenon-cash items, our normalized net income for the third quarter was $62.4million up 13% over last quarter, and 49% higher than our normalized net incomefrom the same period last year.

In the third quarter, we earned$0.34 per diluted share on normalized basis, just above the high end of ourexpectation range. Our normalized weighted average diluted share count for thequarter was 186.8 million shares.

Now, let me review some balancesheet items. Cash generation continues to be very strong. Cash from operationsfor the third quarter was $77.4 million. And on a year-to-date basis, we havegenerated $171 million. That's up 56% over the same period last year. At theend of Q3, we had $566 million in cash, cash equivalents and marketablesecurities on the balance sheet.

Capital expenditures for thequarter declined to $24.9 million in line with our guidance for the full year.Day sales outstanding for the quarter was 59 days, up from 56 days in thesecond quarter.

We're very pleased with our thirdquarter results. As we expected, we saw some seasonality to the traffic growthduring the summer month. But a strong September allowed us to reach the high-endof our revenue guidance for the quarter and this revenue performance combinedwith the continued scalability of our overall business enabled us to exceed ourexpectations on the bottom line.

With our third quarter resultsbehind us, we're on-track to meet or exceed the high-end of our revenueguidance for the year, and we now expect revenue to be between $625 and $629million or 46% to 47% annual growth.

For normalized EPS, we now expectto deliver EPS in the range of $1.28 to $1.29 or 45% to 47% year-over-yeargrowth, which translates into normalized net income growth of at least 52% forthe year.

Excluding capitalized equitycompensation, we continue to expect our CapEx to total just over $100 million forthe year or between 16% and 17% of revenue, as we said last quarter.

On margin for the full year, wecontinue to anticipate that GAAP gross margins will come in around 74% and cashgross margins will be around 83%. We also believe that we are on-track todeliver adjusted EBITDA margin improvement of 4 to 5 points year-over-year,again as we guided last quarter.

Given the increased pace ofcustomer demand in September and October and given that Q4 has typically been astrong quarter for us, we expect our sequential growth to accelerate in thefourth quarter.

Specifically, we anticipaterevenue in the range of $172 to $176 million. At the midpoint of the range,that represents about 8% sequential growth and 38% year-over-year growth. We'reexpecting normalized earnings per diluted share for the fourth quarter of $0.37to $0.38, $0.03 to $0.04 higher than the third quarter, driven by normalizednet income improvement of at least 10% sequentially and 43% year-over-year.

Looking further ahead. Akamaiwill celebrate its 10th anniversary in 2008. And for 10 years, we've been atrusted partner for the most innovative businesses online. And as we enter ournext decade, we're more excited than ever about the new developments andopportunities across all of our segments. With the recent launch of several newcapabilities such as large file optimization, network advancement enabling high-definitioncontent and the introduction of our IP-based application accelerator. Wecontinue to support our customers' most challenging initiatives. And demand foronline content continues to grow with exciting early signs of traction for newvideo opportunities, some of our customers are pursuing.

It's still very early to projectour financial performance for 2008 and we will have much more visibility afterwe see our Q4 results. But we are optimistic about the marketplace and we thinkwe’re in a unique position to capture many of the developing opportunities. Wethink its imperative to invest in areas that will extend our leadership andperformance, quality, scalability and innovative solutions that help ourcustomers to succeed online

As for early guidance, we believethat we will grow both revenue and normalized EPS by 25% to 30% in 2008.

We expect the trends on grossmargins and operating margins to be similar to what we are seeing in 2007,namely, continued unit price declines, particularly in the media and entertainmentsegment, offset by continued cost reductions and operating efficiencies in ourmodel.

We’ll provide more detail on our 2008expectations, as well as our long-range model, when we update you about theentire business during our investor summit and simultaneous webcast on October30th. And we will further update you on our full model, as we always do, on ourfourth quarter earnings call early next year.

Now, let me turn the call backover to Paul.

Paul Sagan

Thanks, J.D. As J.D. justdetailed, the third quarter was another strong quarter for Akamai. Revenue camein at the high-end of our expected range, as we benefited from strong demandduring September as the summer seasonality moved behind us. As businessaccelerated, we were able to drive operating efficiencies and generate earningsabove what we were expecting. The solid results position us to finish the yearstrong, and support continued progress toward our goal of becoming a billion dollarsoftware services company.

Last year, we set out to achieve $1billion revenue goal by the end of the decade. With the financial performancewe deliver to date, we believe we are well on our way to achieving that goal by2010 or even 2009. We demonstrated a disciplined focus on building value forthe long term to a commitment to innovation, which we believe is critical tosupporting the rapidly evolving needs of leading enterprise customers.

Today, Akamai's innovativecapabilities are enabling our clients to launch and support some of the mostchallenging online initiatives. We've delivered some of the largest softwareand media files to an increasingly massive, globally distributed user base.Akamai has supported groundbreaking viewerships for live events over the web,and we have help to enable immersive shopping experiences that are personalizedfor each consumer.

Because our customers keepfinding ways to build new businesses on the Internet, we responded by continuouslydeveloping new solutions to meet their unique and distinctive strategicchallenges, all offsetting the highest standards for quality performance, speedand reliability.

One of these exciting newinitiatives is the recently announced partnership between Apple and Starbuck. Thisrevolutionary product will help transform the way people discover and buy musicand its being enabled by Akamai. By powering content delivery service right inthe coffeehouse, Akamai's shrinking the distance from users and the contentthey want down to the last 10 feet. That's far closer than the last mile, orthe thousands of miles, that historically separated Internet users in thecontent and applications they wanted to reach using other delivery methods.

This raises the bar on the userexperience by providing a new level of personalized and compelling features foronline commerce and entertainment. And its R&D and operational excellencefrom Akamai that are making it possible.

Significantly, we are able tosupport initiatives like this as an extension of our existing capabilities,that' because the investment we have made in the scalability and flexibility ofour highly distributed network and the software that makes it work, is extendedto support new ideas from our customers.

In addition to exciting customerinitiatives, Akamai also announced several new product innovations thisquarter. Through our direct experience serving the most of the leading onlineentertainment sites, we've been evolving with our customers as they shift tohigher and higher video quality. We believe the next big change is to jump tohigh definition video. Put in another way, we are starting to see theintroduction of video entertainment online that can be a substitute for oldfashioned TV. As this technology is broadly enabled, we believe we'll see thenext inflection point in the use of the Internet. And Akamai is helping to leadthis transformation in a number of ways.

Most recently, we introducedenhanced technical support to enable the delivery of consistent high definitionvideo experiences. To showcase these capabilities, we plan to launch HD weblater this month, an initiative that brings together a number of powerfulonline brands at the forefront of rich media experiences. Akamai will work withparticipating customers to power a collection of high definition entertainment,offering Internet users a glimpse into what the Internet of tomorrow will looklike. We believe it will demonstrate an experience that only Akamai can powerusing our unique scale and capabilities.

We're very excited by thisdevelopment, because we believe the requirements in delivering HD experienceonline to television-sized audiences can best be enabled using Akamai's highlydistributed network that places content and end-users in thousands of locationsat the edges of the Internet.

In related development, we alsoannounced the launch of our Large File Optimization Technology. This allowssoftware, gaming and media and entertainment companies to better manage and deliververy large files. By dividing these files into smaller pieces, Akamai can nowoffer extremely flexible storage, delivery and management options that ensure ahigh quality user experience, while also providing greater flexibility andefficiency to content providers.

In the area of applicationperformance services, we've just announced the availability of our new IP-basedapplication accelerator. This new solutions allows enterprises to improve theperformance and availability of applications used by employees, partners andcustomers, whether those applications use a web-based or any other IP protocol.We believe this is a significant strategic extension of our existing capabilityin supporting online applications, and it leverages the technology we integratedwith the Netli acquisition.

As enterprises push more businessprocesses onto the Internet, Akamai's managed service approach is designed tocreate a secure, reliable and high quality environment for mission-criticalapplications.

We remain very excited about thepotential for our B-to-B acceleration services and solutions. And we will beproviding an update on this market as well as on our traditional contentdelivery business at our Investor Summit, next week.

As J.D. just detailed, we believewe are well on our way to completing an outstanding year at Akamai. We're alsovery excited about the potential that continue expanding our business in thecoming years as enterprises migrate more and more critical processes onto theInternet. And a common set of principles tie together our long-term strategy.Akamai is committed to investing in innovations that helps our clients' onlinebusiness models. Akamai will relentlessly search for ways to continuouslyimprove Internet performance, and Akamai's ecosystem of customers, networks andtechnology will continue to drive differentiated value for our customers andshareholders in a way that is extremely difficult to match.

In our first decade of business,we believe we have put ourselves on track to reach $1 billion in revenue, andwe're looking forward to talking to you next week about some of the innovationsand opportunities that we believe will help to continue driving our growth evenfurther.

Now, J.D. and I would be pleasedto take your questions. Operator, the first question, please?

Question-and-Answer Session

Operator

(Operator Instructions). Yourfirst question comes from Tom Watts with Cowen & Company.

Paul Sagan

Hi, Tom. Tom? Operator, we arenot hearing Tom.

Operator

One moment please. Mr. Watts,your line is open.

Paul Sagan

Why don't we just take the nextone and come back to Tom.

Operator

Your next question comes fromTodd Raker with Deutsche Bank

Todd Raker - Deutsche Bank

Hey, guys. How are you? Can you here me?

Paul Sagan

Hey, Todd. That's better. Hi, Todd.

Todd Raker - Deutsche Bank

Can you guys give us a sense of cashgross margin deteriorated a little bit more this quarter, regarding to yourbar. But if you look longer term, I think the biggest concern that I hear frominvestors is relative to your competition, you cash gross margin is quite a bithigher. How do you think strategically, over the long run, we should bethinking about that? And just trying to quantify your ability, you continue todrive EBITDA margins higher, and the cash gross margin see some pressure?

Paul Sagan

Hi, Todd. Why don't we take thatmaybe you could mute the background? All right, J.D, why don't you pick upthat?

J.D. Sherman

Yeah. So, really the history ofAkamai, we've seen price declines. We are in an IT business and that'scontinued. And I think if you look over the life of it, there are probablyperiods where price decline is a little bit faster or sometimes a little bitslower. We don't see any fundamental changes in that. I think the M&E spaceis a particularly price-sensitive space really driven by volumes and biggervolumes driving lower prices. And so, that's driven a bit of an up tick here.

But I think there are threepoints that I have made with inventors and would emphasis. The first is, whilethere is plenty of competition out there, the fundamental market driver here isthe rate of volume growth. And I really believe there is a natural relationshipbetween price and volume that also drives the EBITDA relationship that we'vetalked about.

So, you get more volume onto yournetwork, you are able to scale better on the bottom line. And we've seen thatover the last few years. The second point --

Paul Sagan

J.D., one second. Todd, I thinkif you could mute, I am not sure if that static is drowning us out or not.

Todd Raker - Deutsche Bank

Hey, guys. I am on mute, and I could hear you fine.

Paul Sagan

Okay. Go ahead, guys. I don't knowwhere the static is coming from, but if you can hear us, we will keep going.

J.D. Sherman

Okay. Yeah. The second point,really an extension to that is when we think about profitability and margins,we are focused on improving the profitability on the bottom line as we scale. Thenthe last point probably more directly to your question is we've continued to commanda premium for the solutions that we offer to our customers, which aresignificantly differentiated. And in many cases, they are entirely unique. Thereare things that our competitors really are just simply unable to do based oneither their architecture or their capabilities or the amount of investmentsthat we've made in the software. And that something that we spend a lot of timeeducating our customers, our investors and we will spend a lot of time talkingabout that on our Analyst Day, as well. So hopefully that answers the questionfairly broadly.

Paul Sagan

And let me just add that, I thinkthe most important is that, we don't bring a plain vanilla one size fits allsolution to market. We understand our customers businesses, what the levers areto increase their revenue or drive cost out of their business and our solutionsare targeted that. And I think our customers, while they are always interestedin what are relative prices, they measure us against how much we improve theirbusiness and I think that's why we've been so successful for nearly 10 years.In the phase, frankly of continuous competition the entire time.

Operator next question?

Operator

Thank you your next questioncomes from David Hilal with Friedman, Billings,Ramsey.

David Hilal - Friedman, Billings,Ramsey

First on your margin comment for'08. I think you said that trends will continue for gross margin and operatingmargin, I guess, so I understand the direction of the trend, obviously grossmargins they are coming down operating margin then going up. But I wanted tosee what you also meant was the magnitude would be similar right? So, this yeargross margins look like they are down about 400 basis points, while operatingmargins will be up may be 200 to 300 basis points. So, when you say thosetrends will continue, are you talking directionally or you are also talkingabout the magnitude will be similar in '08 than what we saw in '07?

J.D. Sherman

David. We are really talkingdirectionally at this point. It's still pretty early to layout a full model forour 2008. We are comfortable talking about top and bottom line growth indirectional trends on the income statement. But at this point, we are not goingto give any more detailed guidance on where we think the magnitude is on theups and down.

David Hilal - Friedman, Billings,Ramsey

Okay. And let me ask you on yourcost for bandwidth, can you comment a little bit about the trends you areseeing from your cost standpoint?

J.D. Sherman

Yeah. We don't see any reallysignificant changes in that environment. Keep in mind that we are a prettyunique bandwidth buyer because of (a) The quantities we buy and (b) Therelationships and the way we work the traffic with our network partners andnetwork providers and (c) The relationship we get with some of the ISPs wherewe actually don't pay for the traffic. So, a little bit different than theoverall transit market, I would say.

David Hilal - Friedman, Billings,Ramsey

Okay. And then my final question.When you look at your ARPU, which has been nicely increasing on a consistentbasis. If you had to split that out roughly between how much of that isincreased volume versus cross-selling some of the other value-added servicesyou provide. I am just trying to understanding, what's really driving that ARPUincrease?

J.D. Sherman

Yeah sure. We've been asked thisquestion before, but it's difficult to really split those because the way wesell by solutions but our rule of thumb is that roughly half and half, may beleaning a little bit more to the traffic side but roughly half and half isabout as best as we can quantify.

David Hilal - Friedman, Billings,Ramsey

All right, thank you. Operator?

Operator

(Operator Instructions). We willpause for just a moment to compile the Q&A roster. Your next question isfrom Aaron Kessler with Piper Jaffray

Aaron Kessler - Piper Jaffray

Questions on. First on HDadoption, how early do you we are in that and what stage of HD adoption? Andthen a couple of follow up questions.

Paul Sagan

Well, we are in Boston, so we'll use some baseball analogies.And we're not even in spring training I think on HD, which is the reallyexciting part. It is about to get going, we've seen a steady increase this is avideo over the last 10 years on the web, and we are starting to see to firstevent that compete with television in audience size and in sort of comparableTV quality. And I think that what the content providers are understanding isthat for the Internet to compete with TV, it has, any content anywhere, anytimeadvantage, but it has to have a comparable quality, meaning big screen qualityso that it competes with the standard TV screen in the home.

We are just beginning to see thatemerging, and I think that based on the conversations that we're having withour customers you are going to see DVD and HD offers coming this fall and intonext year. So, I think that we're going to see some really interestingdevelopment over the next 6 to 12 months, we're going to feature some of thosein the initiative that we're going to launch soon with some of our customers toreally showcase what's available on the Internet, because I think people willbe really surprised with the quality that can be delivered and I think we'regoing to see inflection points over the next several years and some reallyexciting developments. So, we're very, very early.

And I think one of the keys for Akamaiis, we've been identifying these trends early like application acceleration,and the migration of applications to the Internet and video to the Internet andnow television quality Internet. And enabling that for our customers and Ithink that's done very well for our business and we expect that it will be areal driver going forward, Aaron.

Aaron Kessler - Piper Jaffray

Great. And just a couple ofquestions for J. D. If you can give a sense may be the churn rate ordirectionally where that's headed, organic growth for Q3? As well as, if youcan just clarify I think the guidance you gave you said it would be roughly 25%to 30% growth at least for '08 for revenue and pro forma, EPS is that correct?

J.D. Sherman

That's correct on the guidance.And churn was again between 3% and 4% which is where it has been for a while orkind of that seems to be like service structural rate for us, tends to be thesmaller customers to churn out.

Aaron Kessler - Piper Jaffray

And then finally the organicgrowth. I don't know if it was organic in the quarter?

J.D. Sherman

Well, we did have acquisitions inthe quarter that we didn't have in the fourth quarter of last year but thereare no new sequential acquisitions.

Aaron Kessler - Piper Jaffray

Right.

J.D. Sherman

I think if you went back andlooked at Q4 last year we had less than $1 million from Nine Systems and now wehave two businesses that kind of around $25 million to $30 million run rate.So, it's still primarily organic growth obviously.

Aaron Kessler - Piper Jaffray

Great, thank you.

J.D. Sherman

Operator?

Operator

Yes sir. Your next question willcome from Mark Kelleher with Canaccord Adams.

Paul Sagan

Hi Mark.

Mark Kelleher - Canaccord Adams

Hello all. I had a quick questionon competition. There is a new entrant coming into the market soon and I justwanted to get your thoughts on the possibility of bundling transports with theCDN, seems like that, logically might give an advantage to the owner of thetransport they own both and help on the gross margin side and maybe the pricingside. Can you just give us your thoughts on that?

Paul Sagan

Well, that's not a new modelthat's been around and tried for the last 10 years, get lots of single networksthat it had one or more CDN offers. And we think that that's a great story forus to going to customer and talk about because the truth is that the largestsingle network in the world deliver single digit share of data to end users,and pretty rapidly you go down to networks who deliver almost no end user data,in fact, some of the largest transport networks have almost no end users. So,if you are content provider, you are sitting and saying, who is going todeliver my content to the end user? Well, it's ISD, it is actually nottransport network. So, the person that you are going to buy Data Center Connectivityto when you need that, if you are going to be on the web it offer all sorts ofthings, he is not the person I think want to talk to, to deliver content toend-users reliably around the globe. And the Akamai model of distributeddelivery inside nearly a thousand networks in thousands of locations gives us adifferentiated performance and scale that our customers recognize.

So, that bundle doesn't reallywork very successfully in my model and in our experience, we have seen it forreally almost a decade. So, what I always say is, we take competition reallyseriously, the water is fine, come on in, there is plenty of people here in thepool already but if others want to come in with that pitch, that's fine. Ithink we will do really, really well because it just doesn't satisfy what thecontent producer really needs.

Mark Kelleher - Canaccord Adams

Okay, that's helpful. And thenswitching gears on to application acceleration. Sorry, if I missed it. But didyou size that for the quarter, the growth percent of revenue?

Paul Sagan

We did not and we historicallyhaven't. We've given updates once a year at our Investor Summit, and we will beproviding some insights into the scale of that business where we think it willexit the year and some exciting initiatives there, that really follow on to therecent announcement that we now can support any IP-based application. We thinkthat's really significant, we certainly started with web-based applicationsbecause that's the space that we were in and we understand the web-basedprotocols and have been supporting, that as a fundamental tentative Akamaiservice. So, it took a little bit more R&D a little work integratingtechnology for the Netli acquisition, but we think now it really completes theportfolio, if you will to go into an enterprise customer and say let's talkabout your applications on the Internet, regardless of the protocol they areusing. We can make them work better which means, we can drive your adoption upand therefore drive more revenue into your business or cost out as you move tothe Internet and off of a call center model or a dedicated network model.

So, we are very pleased with thetraction this year. And we think this sets us up to do even better as ourcustomers are starting to understand that no matter how many appliances theybuy, no matter how well their data center is provisioned, frankly, no matterhow good the transit is that they bought to their data center, they can't solvethe network layer problem for out performance. And that's the name of the gameto drive adoption. And we are really the only managed service today thathandles this in such a unique and simple way and cost-effective way. So, we arereally encouraged by what we've seen. We think we've got a good update for younext week, and we look forward to sharing those details then.

Mark Kelleher - Canaccord Adams

Okay, great. Thanks andcongratulation on a really good quarter.

J.D. Sherman

Thanks Mark.

Paul Sagan

Thanks Mark.

Operator

Your next question comes fromMichael Turits with Raymond James.

Michael Turits - Raymond James

Hi, guys

Paul Sagan

Hi, Michael.

J.D. Sherman

Hi, Michael.

Michael Turits - Raymond James

You gave guidance for next yearon the top line of 25% to 30%. It looks like your guidance for fourth quartergives you an exit rate from this year of about 38% top line growth. So, we haveseen the guidance got decelerating. What are the drivers of that deceleration?I mean just price and quantity. Are you seeing traffic growth rates decelerate?Or are they the same and it's more of an effect of pricing?

Paul Sagan

So, we are still seeing, Michael,pretty incredible traffic growth rates, but not at the rate we were seeing whenwe hit this first inflection point of broadband that really kind of carried usthrough '06 and the early part of '07. So, I do think that while we're seeingtremendous growth, that rate of growth has slowed a bit. The question that weall have and we've talked a lot about is, what's that next inflection point? Wethink it's obviously going to be driven by a push towards higher quality video.And in most of our minds, we think it's not a question of, if that happens butwhen that happens. So, that's the thing we look at the most.

It's really early, frankly, to betalking about what we think is going to happen in 12 to 15 months down the roadin terms of growth and certainly the impact of that inflection point with videocould change a lot of things. But at this point, with what we see, and giventhat we have seen a bit of a deceleration into the back half of this year, wethink 25% to 30% is a pretty good growth number.

Michael Turits - Raymond James

Are those decelerations acrossthe board? How do they stack up on your sectors? Is media decelerating as well?

Paul Sagan

Well, media is the one that'smost price sensitive on the business model and also of the very highest volume.So, it's different. We'll share with you some interesting data on gross marginsand then bottom line margins next week, which I think will explain the leveragein our business in a way that's very positive. It's also very early next yearand as you know, we tend to try to only call what we can see. We're notpredicting the shift to television happens next year. We think it's justbeginning this HD world as we call it, or HD web for television. And so, we arereally pleased with what we are seeing and we'll call it only for what we cansee going forward.

Michael Turits - Raymond James

And it's sort of arithmetically obviousfrom the guidance of 25% to 30% both revenue and EPS growth. But that prettymuch implies that your EBIT growth will be in line with revenue growth. Inother words, margin is kind of flat year-over-year on EBIT basis. And thensince depreciation is accelerating, I would assume that that means that youactually can get an expansion in EBITDA margins. Does that arithmetic makesense to you guys?

J.D. Sherman

Yeah. I mean that's the trend wesaw this year. This year, we will end up with 46% to 47% revenue growth and EPSgrowth with EBITDA margins expanding. And even EBIT, our normalized net incomemargin is expanding, because we have share count growth as well. 2007 was ayear when we made significant investments and in addition, three acquisitionsand absorbed that into the model. And I think 2008, as I talked about and Paultalked about, we think it's really important to keep investing for the growthof this business. And we spent a lot of time challenging ourselves to makethose investments, make them as productive as possible and then driveefficiency in the model, so we can drive bottom line growth, as well.

Michael Turits - Raymond James

Okay, guys. Thanks very much.

J.D. Sherman

Thanks Michael. Talk to youlater.

Paul Sagan

Thanks Michael.

Operator

Your next question comes fromJohn Walsh with Citigroup.

Paul Sagan

Hi, John.

J.D. Sherman

Hi, John.

John Walsh - Citigroup

How are you?

J.D. Sherman

Good.

John Walsh - Citigroup

Paul, can you talk about themonetization that you are seeing on your customers on the media andentertainment side, where you think they are at with that? And should that bethe inflection point that everybody is looking at, if they get a qualityadvertising base, support model into their delivery of their video content?

Paul Sagan

I think that's one of the crucialchickens and eggs here that's going on, which is the monetization is beginning.There's some models that are really working. But it's still pretty early. Thebulk of the marketing dollars are still offline, not online. And even theonline ones, most of them are not in video. But that's changing. We're seeingthat with real rise in the rich media advertising servers and how theirbusinesses are growing. But, again, not all of that is true video. And I thinkpeople are still playing around for what model works. Here the consumer ispretty inpatient with the 15-second pre-roll that comes before the 45-secondclip. That's a worse ratio than watching TV without the ability to fast forwardout the commercials, if you will.

So, I think people are stillplaying around with that and it's just beginning. We're certainly seeing itwith entertainment in sports content. I think that it's a little less clear insome of the web 2.0 models, we're seeing some of those players, particularlythose that are user-generated content and video-intensive with large traffic,but very questionable models. So, we've been pretty cautious in those spaces.We like to have customers who we know have models that will grow with us andpay us over the long term. And so, I think that you're going to have someconsolidation at some point with so many new entrants coming in with unprovenmodels. But overall, I think that you're going to see this is a big netpositive, as the audience moves, clearly the marketing dollars have to go withit.

The other interesting thing isthat we're seeing lots of, if you will, brand sites that are rich mediaexperiences. As markets don't necessarily like to put their commercials in themiddle of somebody's TV program, they can create compelling reasons, content,competitions, contests, if you will, that drive people to their own sites. So,a lot of our business is in, if you will, the commerce space or the enterprisespace, is people who are creating rich media experiences with video and audio,and if you will, original programming. And that's pretty exciting where theycan -- you can get a captive audience and give them their message that isn'tjust an interstitial in somebody else's.

So, I think that's a big piece ofthe video migration and also good for our business, especially with enterpriseswho want great reporting, analytics, security and then at the end are doing atransaction and need to capture the commerce dollar, our dynamic capabilities,which I think are really unmatched in the industry, give us the ability toprovide a much more compelling solutions to people who are really contentproviders even though you wouldn't traditionally think of them as an M&Ecustomer.

And they have to richen up theirsite, not just because there's an upside potential in their business. But ifthey don't have a rich media site, it would be like running a black and whiteTV commercial. The audience would just think you weren't keeping with the timesand that would hurt your brand. So, we think those are all positive trends forus.

John Walsh - Citigroup

And then just one on thenon-media entertainment or the e-commerce the advertising side. As we move intothe shopping season, the holiday season, anything that you seeing as far asonline retailers trying to do more things in the same pace I guess forinnovation? Or do you see some interesting things coming down the pipe, whetherit's traditional retailers more focusing on the web or on the online channel?Any color you can give us from that.

J.D. Sherman

I think everybody is very focusedon it. It's a real channel. Our customers have early lockdowns. Their sites arelocked and loaded. They're expecting to do billions of dollars of commerce. Andthey're not joking around anymore. As I talk to the leadership of our biggestcommerce sites, they are often the biggest channel now or certainly the fastestgrowing. So, they have big plans. I wouldn't say that there's a fundamental newtrend or something there. But they are increasingly concerned about security.

One of the big issues that'sgoing to be PCI compliance and how the online world adapts to that. And I thinkthat's going to be just a gigantic question for commerce sites, not so muchthis year, but next year. And people who bring PCI solutions to market, I thinkare going to be unusually well-positioned to capture opportunity there. I thinkin terms of this, if you will, Christmas selling season, it's a little early toknow, as you know, they get ramped up into November and then there's a crucialMonday after Thanksgiving to Christmas season. We certainly think we're reallywell-positioned, that our customers are optimistic. And that one we'll justhave to see how it plays out in the quarter.

John Walsh - Citigroup

Okay. And then just real quick onthe CapEx for next year. How should we think of it at least directionally,J.D.?

J.D. Sherman

Yeah. I would say, again, it'svery early and it's like one of the most difficult things to predict becauseyou are also predicting growth into 2009 when you think about your CapEx. Idon't see a tremendous up tick particularly in the area of network gap thatwe'll likely have some up tick in our once in a decade facility, that's great,which will talk a little bit more about as we go here. But, we'll continue toget the efficiency and productivity out of network, and I expect that to be atconsistent level.

John Walsh - Citigroup

Okay. Great, thanks guys.

J.D. Sherman

Thanks John. Operator?

Operator

Your next question comes from TomWatts with Cowen & Company.

J.D. Sherman

Hi, Tom. We said we'd get back toyou. Is it working this time?

Tom Watts - Cowen & Company

I think it is if you can hear me?

Paul Sagan

Yes can

Tom Watts - Cowen & Company

Oh God, its good improvement.Still two additional questions, one, it seems that you have been very effectivegetting some exclusive contracts wherever some of your major customers. At thesame time people have talked it and treated it as a trend in the industrytowards multi-sourcing of content delivery services. Could you just comment onthat and then whether you see multi-sourcing as a major factor versus yourplace for exclusivity.

In the second question, therehave also been some comments that you may be working on a peer-to-peer product,if you could just comment, where do you see peer-to-peer within the industry,if you see that playing a major role in content delivery?

Paul Sagan

Sure. This is Paul, I'll takeboth of them. We actually don't push for exclusive contracts it doesn't veryoften come up. We think the quality of our services speak for themselves, wherethey can help our customers, we want them to use them. And where there areother things that they want to do, they should make the right choice for theirbusiness we want to go in and demonstrate our value. We think we do and wethink we do it extremely well.

Certainly, there are lots of waysthat people provide backups or alternatives including doing yourself. And, wework with our customers to match but I am not sure that there is a change inthat market at all. And we haven't made a secret about our interest in usingclient delivery as an aspect of an offer that will bring out in the future, youwill recall that we purchased Red Swoosh earlier in the year, we are veryoptimistic about that client technology becoming in addition to our contentdelivery networking. I would say that while there seems to be more hype aboutpeer-to-peer than ever before, that technology and solutions have been aroundlonger than Akamai without getting any traction in the commercial marketplace,really because of the lack of QOS and direct tie to piracy and lack of digital rightsand all sorts of problems with not just the content providers right but enduser machines and performance et cetera.

But we are very optimistic thatyou can marry some client delivery with a robust backend for control, andanalytic, with our content delivery solutions to really a best-in-breed offerthat really raises the bar on scale and cost parameters. But that's going totake a while to bring into market and test.

I also think that, there is apretty simple math that people ought to go through that explains why peer-to-peerdoesn't solve the content delivery problem, even if you take piracy and allthose other issues off the table. And that is that bandwidth that people have attheir home, for example, isn't symmetrical, so the amount that you can upload ismuch smaller than what you can download. And so, say the degradation is five toone, that means you need five users feeding everyone who wants the content andthen those users have to have the peer, they have to have the peer turned on,they have to not but using their machine themselves are not using it much, thenthey have the right content.

So, it's not as simple as justsaying if everyone who wanted to watch TV could do it over peer-to-peer becauseyou just wouldn't have enough machines that could do it with the bandwidth thatwould make it work. So, we think it is an add-on to what we are doing. It isnot a replacement for any of the solutions that we've brought to market. Therehas also been a lot of interesting exchange lately around the ISPs who don'tlike this traffic because in their view it abuses their network resources andoften they stifle that traffic or don't allow it to happen.

Our situation is very unique. Weare embedded deep inside these networks and have a partnership. So, we thinkthat we can use Edge technology in a way that help their networks, doesn'tdegrade their network or skew their economics. Which they look forward to beingmay be the only company that can effectively partner with ISPs to use an Edgesolution married to our traditional content delivery distributed network. So,that's a long winded answer to say, we are interested, we are involved, we'vebeen very public about that, but we don't have any product or serviceannouncements to make right now .

Operator next question.

Operator

Your next question comes from theline of Colby Synesael with Merriman.

Paul Sagan

Hi Colby.

Colby Synesael - Merriman Curhan

Hi, guys. I noticed that yourreseller revenue has actually dipped for the first quarter in a while. I waswondering what the reason behind that was I guess Internet was one of yourbigger resellers at that time, finally just impacted the income statement. Andthen I have one more question after that again.

Paul Sagan

Why don't you give us both justin case we alluded you we had obviously a little trouble with the phone bridgetechnology today.

Colby Synesael - Merriman Curhan

Sure. The other question had todo with your product strategy obviously you have been making a lot ofannouncement to expand out beyond just content distribution, is that a signthat the content distribution business by itself is a necessary going to beenough to support where you guys want to take this company from a strategicstandpoint or is it just a matter of you think there is a lot of value you canget from an incremental margin standpoint by adding these products?

Paul Sagan

Okay, I'll take the firstquestion on the resellers. We have been as you know transitioning the way fromInternet as reseller shifting some of those are some revenue from resellermodel to direct. And that's gone pretty well. The big driver though in thisquarter was resellers in the government public sector, because we do all of ourbusiness in public sector through the government. We have one particular customdeal with the government agency that we wrapped up in the last quarter, and sothat led to a bit of a revenue decline. As you know the public sector revenuetends to be a bit more lumpier than in the other revenue because it's based onthe lot of custom contracts. So, really that was the big driver on resellers.We haven't changed our reseller strategy at all or anything like that.

J.D. Sherman

And I'll take the productstrategy. Actually, it set me up for a great history lesson so I appreciate it.I think actually one of the things that people do especially if they are newerto the Akamai story is over simplify and things that we actually set up to be aCDN or content delivery network company which is what a lot of other peoplehave done and are trying to do. And actually, the ideal Akamai go all the wayback to the founders Tom Layton our Chief Scientist and the late Danny Lewin, witha much, much bigger idea, was this idea of using distributed computing tochange the way business has compute, and move to a network model and build ifyou are distributed computing capability across the Internet, across the publicnetwork, it would be leveragable by businesses for all sorts of application.So, content delivery and video was one idea.

Dynamic content applied tocommerce was another. The whole idea of application acceleration leverages allof our intelligence about the network, what we know about network performancein real time and our ability to do routing across the public Internet that wedon't believe anyone else can do, so we are looking for logical extensionsbecause one of the powers in the business model is have with you all this plainvanilla hardware platform, done by adding software and making that available toservice, we can provide bundles of capabilities to all sorts of businesscategories to grow their business.

And that's why we think thatwe've been able to develop a business that we believe is on a trajectory to getto $1 billion there are very few handful of $1 billion software companies andwe believe that we will be one of them and one of the first one to do that withthe software to services model and so CDN is a great opportunity and as youknow that's the lion share of our business, we'll talk a little bit more aboutthat at our summit next week, but we think as acceleration leverages thetechnology we had enabled us or let us to develop some more software and addedto same network and open up whole new markets that are extremely attractive forus and highly differentiated.

So, its not a question of sayingto you, we are tired of CDN, we are investing a lot in solutions there, youseen us make acquisition even as recently as the Nine Systems acquisition forsome really important capabilities, there that were now rolling out, and makingavailable to our entire customer base.

What we think that addingapplication for acceleration and frankly we've got other things in theincubation stage that we are extremely excited about that we think will begreat stories for the second decade, leaves us really believing that Tom andDanny were right from day one now, really the original idea over a decade agoand that there is really no end insight or what we could do with itsdistributing capability across the massive and ever growing public Internet.

Operator, we will take the nextone.

Operator

Your next question comes from theline of Harry Blount with Lehman Brothers.

Harry Blount - Lehman Brothers

Couple of quick questions foryou. First of all, J.D. on the commentary you said about the 61 net newcustomer adds and focusing more on quality. Does that mean then that the newcustomers adds ARPU, if we compare the ARPU of these new customer adds toprevious customer adds in general are higher? I mean I know that the newcustomer ARPU are lower than the embedded base but --?

J.D. Sherman

Yeah, honestly, Harry, I have toadmit I didn't look at what the ARPU of the new customer adds were. That wouldbe a reasonable premise, but I haven't looked at that. The broader point isthat we are not running like a telemarketing job shop, just to sign up anysmall customer base, because we don't think we can turn those into profitablecustomers and they don't tend to grow. It doesn't help us scaling our model.So, we focus on winning key customers in targeted industries. In someindustries, obviously, customer adds are very important to us, like with thenew application performance area where we continue to add customers.

In other areas, customer adds arekind of less important, where we already are very well penetrated in certainsectors. So, that's the broader commentary. I'm sorry I don't have a specificanswer on your direct question.

Paul Sagan

Harry, it's Paul. From astrategic point of view, we think of ourselves like the leading softwarecompany, like an Oracle or SAP or IBM that focus on an enterprise class ofcustomers and understands all that you can mine out of them and then try topenetrate them broadly and deeply and don't try to move into down scale marketswhere the customers don't really value differentiation. And I would say that'sour strategy. With the caveat that you identified that the new customers stilltend to start smaller than average and then we try to grow them up.

Harry Blount - Lehman Brothers

Right. I guess, where I was goingwith it is I am thinking about the longer term model. Should we be thinkingabout probably lower average net new customer adds, i.e., things that are morein the 50, 60s but with higher net new ARPU. Is that essentially the directionof the question I was going.

J.D. Sherman

Well, I don't know that we have aset number to expect every quarter. In fact we don't try to target that. But Ithink as a percentage of the base that will go down, because we are not goingto try to grow the volume.

Harry Blount - Lehman Brothers

Right.

J.D. Sherman

Its also the summer quarter. So,a difference of five or ten or so off of what might have been a rolling average,I don't really see as significant.

Harry Blount - Lehman Brothers

Okay.

J.D. Sherman

And we've definitely seen thattrend in terms of the source of our revenue growth has really shifted towardsgrowth in our existing customer base over the last couple of years.

Harry Blount - Lehman Brothers

Got it. And then Paul, on theStarbucks announcement, I believe that's your first significant clientdeployment, if memory serves?

Paul Sagan

You mean in a specialized sense?

Harry Blount - Lehman Brothers

Yeah.

Paul Sagan

That's true. It really is,certainly, the first time we've been involved in something like this, wherewe've done specific deployments for a specific customer in commercial space inpublic locations like that. You know, you've got two very leading edgecompanies who understand the entertainment market and the experience market andhow performance and place matter a great deal. And we were able to leverage ourexisting technology, do some custom R&D and I think rollout something thatwill be really, really exciting.

Harry Blount - Lehman Brothers

Where I'm going with the questionis, does this (a) allow you to deliver non-Starbucks applications and realizenon-Starbucks or non-Apple related revenue as well? And if so, any sense inwhat you can provide us in terms of thinking about it? I think this is reallyan interesting opportunity to extend the network.

J.D. Sherman

So, great question, which I willduck a little bit, because I won't talk about any of the specific detail vis-à-visour two partners. I will say that this announcement is only about being inStarbucks' locations. So, we obviously can't access anyone outside of them,because it will be accessed over the Wi-Fi connection in the store.

Harry Blount - Lehman Brothers

Okay, great. Thank you.

J.D. Sherman

Thank you. Operator?

Operator

Your next question comes from RodRatliff with Sanford Group.

Paul Sagan

Okay. Hey, Rod, and I'd love forpeople to try to keep the questions tight because I know we had a slow startwith the technology, and people always say done run over an hour and we'realready over an hour.

Rod Ratliff - Sanford Group

You know me better than that,Paul. I know how to keep my mouth shut.

Paul Sagan

Go right ahead.

Rod Ratliff - Sanford Group

I've got two questions quicklyhere. To extend Harry's question just a little bit, are you looking at anyother types of wireless web applications at all, Paul? If you can give me ananswer without tipping your hand about anything that you might want to talkabout at Analyst Day or whatever?

Paul Sagan

Sure. Well, we've always beenexcited about the wireless market. We've talked about in the past that we thinkwe do a large amount of the wireless video, for example, that's delivered tohandsets already in the States. I think I'm a little perplexed because peopletalk about the Internet and wireless like they are two markets. In thisconverging IP world, those are just more end points on the Internet and they'revery low bandwidth, less miles relative to a wired model. And they move arounda lot. But then the opportunity to do personalization, place space content andvideo or audio is really, really exciting. So, we just think it's one of thosedrivers that's different than, say, the HD web because it's not an HDexperience. But one of the drivers that our customers are finding really coolways to monetize, like the announcement of our partners made recently.

Rod Ratliff - Sanford Group

It just occurred to me thatT-Mobile was involved with their hot spot technology. Now anyway, on to my nextquestion. With regard to the HD TV over the web announcement, is there any sortof involvement with the tiny Red Swoosh acquisition there? Any of thattechnology involved?

Paul Sagan

We will be making the HDannouncements next week and when we are ready to make Swoosh basedannouncements, we will let folks know.

Rod Ratliff - Sanford Group

Okay. Shut up, Rod.

Paul Sagan

You know -- whatever.

Rod Ratliff - Sanford Group

Outstanding quarter. Very happyfor you. Good job.

Paul Sagan

Thank you very much.

J.D. Sherman

Thanks Rod.

Paul Sagan

Next question, operator. May bejust one more.

Operator

Your next question comes fromDarren Aftahi with ThinkEquity.

J.D. Sherman

Hi, Darren.

Paul Sagan

Hey, Darren.

Darren Aftahi - ThinkEquity

How are you? So, quickly twoquestions. As you think about high definition going forward, how is that goingto impact your CapEx say in 2008 and some of this is sort of frontloaded firsthalf of '07 taken of that? And my second question is, directionally over thenext, call it, two to three years, I know you gave 25% to 30% top line growthin '08. But could we see a deceleration of growth and then an inflection pointafter that because there is, at least in our view, not enough devices out thereto deliver broadband video to the home, at your living room and when that doesstart to track up, your business would actually reaccelerate?

Paul Sagan

Well, this is Paul. Let me justhandle it this way, which is, in a high growth market, I think there is a lotof fluctuation. We saw that with a huge inflection point last year. I think agreat year this year but at a somewhat lower rate. I think there will beinflection points and they will have bearing on revenue and profitabilitygrowth, where you can see swings and the same on CapEx as J.D. indicated.

CapEx is a function of expectedtraffic growth is one thing and also what we think of the year after. So, whereHD for example takes off next year, will set the table probably morefundamentally for '09 and that will effect both our view of revenue and CapExprobably in '09, '10. And that's pretty far out to model to closely and wecertainly don't try give guidance that far, no.

Operator, why don't we take oneor two more really quick ones if we can. Apologies that we have run over thehour, folks.

Operator

Yes, sir. You have time. Yournext question is from Tim Klasell with TWP.

Paul Sagan

Hi, Tim.

Tim Klasell - TWP

Hi guys. Just a real quickquestion on, you mentioned the mix on ARPU being a little bit more than 50% onthe content delivery. Going forward, how do you expect that to trend as you addin application acceleration and other value added services?

Paul Sagan

Well, I think the issue with ARPUis how much is new services and how much is traffic and with the massivetraffic growth at the inflexion point, it probably will tick a little bit abovethe 50/50 in favor of traffic. Could go back to 50/50. Hard to know I think thetraffic will probably be a slightly larger driver going forward then the othervalue added services. But we are very optimistic about those and they have someterrific margin profile to them as well. So, we are happy to expand thebusiness, the same store sales, if you will, with both equally or frankly, ifit want to be the, distorted one way or the other. I think we win either way.

Tim Klasell - TWP

Okay, good. And then, as far asthe vertical markets are concerned, obviously we saw an up tick in the M&Espace. What are you expecting going into '08? Is there any one vertical thatyou are little more optimistic than the rest?

Paul Sagan

No. I think they are all very,very strong with the great strength I think in the commerce capability.Government is probably the one, that's the hardest to call and tends to belumpier and there's so much resource being ploughed in to the war. I think thathave slow down some of the civilian development there. But that businessremains strong and growing well as well. We will give you that segment to younext week and you will see a little bit better of our view and really strongstores everywhere.

Tim Klasell - TWP

Okay, very good. Thanks.

Paul Sagan

Thanks one last question,operator.

Operator

Your last question comes from RobSanderson with American Technology.

Paul Sagan

Hi, Rob.

Rob Sanderson - American Technology

Great. Yeah, thanks. Goodafternoon, gentlemen. Thanks for taking the question. Most have been asked andanswered, so I'll keep it to one. But any noticeable change in the mix ofbursting activity this quarter? And do you see any reason structurally otherwisethat might change this relationship going forward.

Paul Sagan

No. No, change and don't expectone either going forward. So, thank you all for those of you who --

J.D. Sherman

The other piece of guidance wewant to give is that we project that the Sox win the series in somewhere betweenfour and seven games, before we leave.

Paul Sagan

Yeah. We will be able to tightenthat guidance range next week in our comments. Hopefully, apologies to those ofyou in Denver, we will be celebrating here in Boston. Those of you who will seein person, safe travel, those who will be joining by webcast, look forward totalking to you again in less than a week. Bye.

Operator

Ladies and gentlemen, thisconcludes today's conference call. You may now disconnect.

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