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Akamai banks on Edge Computing
Profit remains distant
Akamai Technologies Inc, which has never been profitable, is banking on its forthcoming edge computing services as a growth opportunity, as its cash reserves continue to dwindle and profitability is at least over a year away,writes Kevin Murphy
During a conference call yesterday to announce financial results for the fourth quarter, Akamai CEO George Conrades said the company expects to bring an edge applications delivery service to market in the second quarter, under a previously announced Websphere deployment deal with IBM Corp.
Akamai’s plan is to offer companies "computing as a utility on demand" Conrades said. He said the company plans on "virtualizing the data center" and "breaking the application deployment bottleneck", by allowing customers to deploy J2EE and .NET applications of Akamai’s global network of edge servers.
Asked during the call what kind of services Akamai intends to introduce as part of its edge computing initiative, Conrades said: "The thing to look for when looking for applications is verbs like apply, configure, model, locate... that’s the kind of application we have a very strong applicability to."
Conrades reiterated that EdgeSuite, Akamai’s flagship content delivery service, brings in four times more revenue than its original basic FreeFlow offering, on average $20,000 per user per month versus $5,000 per user per month. "We believe edge computing will grow revenues even more," he said.
The company needs the boost. Revenues have been down or flat for over a year, and even though they have now apparently stabilized, profitability is still distant despite several rounds of cost-cutting moves.
The company yesterday reported a GAAP net loss for the quarter to December 31 of $53.8m, compared to a loss of $64.8m a year earlier, on revenue that was down almost 5% at $35.4m. For the year, the net loss was $202.6m compared to $2.4bn on revenue down 11% at $144.9m.
Akamai has postponed profitability a number of times over the last few years as the economy declined and its dot-com customer list was purged, all the while maintaining it had enough cash to get there eventually.
The company has yet to put a firm date on GAAP profit, and did not give guidance, but says it will be "free cash flow positive" in the fourth quarter. Assuming that can be achieved, things look a little better on the balance sheet.
Sequentially, cash and equivalents, restricted cash and marketable securities was down $16.8m, versus a $29.1m burn in the third quarter. On the year, the same number was down $85.3m. The firm ended the year with almost $140m current assets, about $112.3m of which was cash and equivalents.