Akamai Unveils Reorganization
February 09 2016 - 8:20PM
Dow Jones News
Akamai Technologies Inc.'s security business enjoyed a jolt of
new business from besieged websites last year, even as its big
Silicon Valley customers spent less money on its network.
The shift came as Akamai unveiled Tuesday a reorganization that
will divide its operations into two distinct business lines: one
focused on Web security and other services, and another division
focused on media delivery. As part of the changes, Akamai said
longtime executive Robert Hughes would retire as president of
world-wide operations.
The Cambridge, Mass., company also launched a $1 billion stock
buyback plan to defray the costs of compensating workers. The
company had more than 6,000 employees at the end of 2015. Chief
Executive Tom Leighton said the company would slow the pace of new
hiring but didn't plan any layoffs.
In the fourth quarter, earnings fell to $88.4 million from $97.1
million a year earlier as the company's stock-based compensation
costs rose. Revenue climbed 8% to $579.2 million.
Shares of the company, down by a quarter so far this year,
gained 16% after hours to $45.90.
Akamai estimates between 15% and 30% of all Web traffic passes
through its network of more than 210,000 servers around the world.
The machines are a key part of the infrastructure needed to build
online video services into viable competitors for satellite and
cable providers.
Video and software offered through Apple Inc., Facebook Inc. and
Microsoft Corp. have fueled much of the company's past profits,
though more of that traffic is flowing through big tech companies'
self-built systems, an effort to save on costs.
The company last year warned that its top media customers might
spend less on its services as they invested in their own networks.
Executives said that would continue in 2016, with two customers
worth about 13% of revenue in the past expected to shrink to about
6% this year.
"There is significant opportunity for growth outside of those
two accounts," Chief Financial Officer Jim Benson said.
As part of the reorganization, Akamai said President Rick
McConnell would become general manager of the realigned Web
division and Bill Wheaton would continue as general manager of the
media division.
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Maria
Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
February 09, 2016 20:05 ET (01:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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