Davis Freeberg

Akamai Will Be Essential for Hotspot Prevention

With VOD, IPTV and other broadband intensive applications popping up everyday, I don't think that anyone doubts that Akamai is well positioned for growth, but that doesn't answer the question of what should that growth should be worth to investors. In your article, you point out how much Akamai is making, but there isn't any discussion of why these numbers deserve such a high multiple. I'd like to see a discussion of why they are worth a premium, instead of just pointing towards IPTV as a growth driver. With a market cap of $5.5 billion, how much upside is really left in this story? In the past, Akamai has been valued on free cash flow, but as their tax breaks end, what impact will this have on their valuation? While Akamai is clearly a very well run company, at what point do you have to consider the competition, instead of valuing the company as a monopoly? These are all questions that people should be asking. Instead of focusing on the growth of their underlying business, I'd rather see an open discussion of why investors should be paying almost ten times their sales, for a company that is seeing their core business commoditized?