Statement Of Financial Position
| Statement Of Financial Position Classified (USD $) | ||
| In Thousands | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Dec. 31, 2008 |
| Current assets: | ||
| Cash and cash equivalents | $321,083 | $156,074 |
| Marketable securities (including restricted securities of $3,330 at June 30, 2009 and $3,460 at December 31, 2008) | 298,943 | 174,557 |
| Accounts receivable, net of reserves of $16,540 and $11,270 at June 30, 2009 and December 31, 2008, respectively | 144,537 | 139,612 |
| Prepaid expenses and other current assets | 33,161 | 27,124 |
| Deferred income tax assets | 4,542 | 4,542 |
| Total current assets | 802,266 | 501,909 |
| Property and equipment, net | 174,742 | 174,483 |
| Marketable securities (including restricted securities of $153 each at June 30, 2009 and December 31, 2008) | 306,752 | 440,996 |
| Goodwill | 441,875 | 441,258 |
| Other intangible assets, net | 84,518 | 92,995 |
| Deferred income tax assets, net | 173,749 | 223,718 |
| Other assets | 5,068 | 5,592 |
| Total assets | 1,988,970 | 1,880,951 |
| Current liabilities: | ||
| Accounts payable | 19,279 | 21,165 |
| Accrued expenses and other current liabilities | 41,419 | 66,132 |
| Deferred revenue | 28,082 | 11,506 |
| Accrued restructuring | 1,148 | 1,653 |
| Total current liabilities | 89,928 | 100,456 |
| Other liabilities | 14,802 | 10,619 |
| Deferred revenue | 3,494 | 1,251 |
| 1% convertible senior notes | 199,855 | 199,855 |
| Total liabilities | 308,079 | 312,181 |
| Commitments, contingencies and guarantees (Note 15) | - | - |
| Stockholders' equity: | ||
| Preferred stock, $0.01 par value; 5,000,000 shares authorized; 700,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued or outstanding | 0 | 0 |
| Common stock, $0.01 par value; 700,000,000 shares authorized; 173,515,314 shares issued and 172,802,114 shares outstanding at June 30, 2009 and 169,371,675 shares issued and outstanding at December 31, 2008 | 1,735 | 1,694 |
| Additional paid-in capital | 4,581,290 | 4,539,154 |
| Accumulated other comprehensive income (loss) | (12,500) | (24,350) |
| Treasury stock, at cost, 713,200 shares | (14,994) | 0 |
| Accumulated deficit | (2,874,640) | (2,947,728) |
| Total stockholders' equity | 1,680,891 | 1,568,770 |
| Total liabilities and stockholders' equity | $1,988,970 | $1,880,951 |
1_Statement Of Financial Positi
| Statement Of Financial Position Classified (Parenthetical) (USD $) | ||
| In Thousands, except Share data | Jun. 30, 2009
| Dec. 31, 2008
|
| Marketable securities, restricted securities | $3,330 | $3,460 |
| Accounts receivable, reserves | 16,540 | 11,270 |
| Marketable securities, restricted securities | $153 | $153 |
| Preferred stock, par value | 0.01 | 0.01 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares designated as Series A Junior Participating Preferred Stock | 700,000 | 700,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value | 0.01 | 0.01 |
| Common stock, shares authorized | 700,000,000 | 700,000,000 |
| Common stock, shares issued | 173,515,314 | 169,371,675 |
| Common stock, shares outstanding | 172,802,114 | 169,371,675 |
| Treasury stock, shares | 713,200 | 0 |
Statement Of Income Alternative
| Statement Of Income Alternative (USD $) | ||||
| In Thousands, except Per Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
| Revenues | $204,600 | $194,004 | $414,968 | $381,023 |
| Costs and operating expenses: | ||||
| Cost of revenues | 60,009 | 53,688 | 120,371 | 105,263 |
| Research and development | 9,378 | 9,519 | 20,234 | 18,823 |
| Sales and marketing | 41,437 | 41,188 | 83,707 | 77,132 |
| General and administrative | 35,144 | 33,803 | 71,212 | 67,069 |
| Amortization of other intangible assets | 4,238 | 3,491 | 8,477 | 7,081 |
| Restructuring charge | 0 | 0 | 454 | 0 |
| Total costs and operating expenses | 150,206 | 141,689 | 304,455 | 275,368 |
| Income from operations | 54,394 | 52,315 | 110,513 | 105,655 |
| Interest income | 4,059 | 5,490 | 8,799 | 13,531 |
| Interest expense | (710) | (710) | (1,420) | (1,420) |
| Other income (expense), net | 184 | (970) | 1,318 | (494) |
| Gain (loss) on investments, net | 105 | 64 | 560 | 272 |
| Income before provision for income taxes | 58,032 | 56,189 | 119,770 | 117,544 |
| Provision for income taxes | 22,025 | 21,855 | 46,682 | 46,299 |
| Net income | $36,007 | $34,334 | $73,088 | $71,245 |
| Net income per weighted average share: | ||||
| Basic | 0.21 | 0.21 | 0.43 | 0.43 |
| Diluted | 0.19 | 0.19 | 0.39 | 0.38 |
| Shares used in per share calculations: | ||||
| Basic | 172,561 | 167,417 | 171,540 | 166,688 |
| Diluted | 189,556 | 187,641 | 188,870 | 187,493 |
Statement Of Cash Flows Indirec
| Statement Of Cash Flows Indirect (USD $) | ||
| In Thousands | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
| Cash flows from operating activities: | ||
| Net income | $73,088 | $71,245 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 58,356 | 46,058 |
| Stock-based compensation expense | 28,387 | 28,248 |
| Provision for deferred income taxes, net | 43,167 | 43,952 |
| Amortization of deferred financing costs | 420 | 420 |
| Provision for doubtful accounts | 3,521 | 736 |
| Excess tax benefits from stock-based compensation | (658) | (10,282) |
| Loss (gain) on investments and loss on disposal of property and equipment, net | (387) | (303) |
| Gain on divesture of certain assets | (1,062) | 0 |
| Changes in operating assets and liabilities, net of effects of acquisitions: | ||
| Accounts receivable | 10,660 | (5,708) |
| Prepaid expenses and other current assets | (4,275) | (8,815) |
| Accounts payable, accrued expenses and other current liabilities | (21,337) | (8,107) |
| Deferred revenue | 946 | 1,099 |
| Accrued restructuring | (675) | (543) |
| Other non-current assets and liabilities | 4,149 | (197) |
| Net cash provided by operating activities | 194,300 | 157,803 |
| Cash flows from investing activities: | ||
| Purchases of property and equipment | (34,033) | (45,943) |
| Capitalization of internal-use software development costs | (13,687) | (12,579) |
| Purchases of short- and long-term marketable securities | (163,882) | (358,459) |
| Proceeds from sales of short- and long-term marketable securities | 141,511 | 154,033 |
| Proceeds from maturities of short- and long-term marketable securities | 50,161 | 95,782 |
| Cash paid for acquisition of business | (5,779) | 0 |
| Proceeds from divesture of certain assets | 1,350 | 0 |
| Proceeds from the sale of property and equipment | 4 | 74 |
| Decrease in restricted investments held for security deposits | 130 | 0 |
| Net cash used in investing activities | (24,225) | (167,092) |
| Cash flows from financing activities: | ||
| Proceeds from the issuance of common stock under stock option and employee stock purchase plans | 10,763 | 18,132 |
| Excess tax benefits from stock-based compensation | 658 | 10,282 |
| Repurchase of common stock | (16,905) | 0 |
| Net cash (used in) provided by financing activities | (5,484) | 28,414 |
| Effects of exchange rate changes on cash and cash equivalents | 418 | 1,214 |
| Net increase in cash and cash equivalents | 165,009 | 20,339 |
| Cash and cash equivalents at beginning of period | 156,074 | 145,078 |
| Cash and cash equivalents at end of period | 321,083 | 165,417 |
| Supplemental disclosure of cash flow information: | ||
| Cash paid for income taxes | 17,773 | 7,211 |
| Cash paid for interest | 999 | 999 |
| Non-cash financing and investing activities: | ||
| Capitalization of stock-based compensation as internal-use software | 3,152 | 3,591 |
| Common stock returned upon settlement of escrow claims related to prior business acquisitions | ($213) | ($952) |
Notes to Financial Statements
| Notes to Financial Statements | |
| 6 Months Ended
Jun. 30, 2009 USD / shares | |
| Notes to Financial Statements [Abstract] | |
| 1. Nature of Business and Basis of Presentation | 1. Nature of Business and Basis of Presentation Akamai Technologies, Inc. (Akamai or the Company) provides services for accelerating and improving the delivery of content and applications over the Internet. Akamais globally distributed platform comprises thousands of servers in hundreds of networks in approximately 70 countries. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. Akamai currently operates in one industry segment: providing services for accelerating and improving delivery of content and applications over the Internet. The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. These financial statements include the accounts of Akamai and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying financial statements. Certain information and footnote disclosures normally included in the Companys annual audited consolidated financial statements and accompanying notes have been condensed or omitted in these interim financial statements. Accordingly, the unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in Akamais annual report on Form 10-K for the year ended December31, 2008, filed with the Securities and Exchange Commission on March2, 2009. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited consolidated financial statements include all adjustments and accruals, consisting only of normal recurring adjustments, that are necessary for a fair statement of the results of all interim periods reported herein. The Company evaluated subsequent events through August10, 2009, the date it filed its report on Form 10-Q for the quarter ended June30, 2009 with the Securities and Exchange Commission, and had no material subsequent events to report. |
| 2. Recent Accounting Pronouncements | 2. Recent Accounting Pronouncements On January1, 2009, the Company adopted Financial Accounting Standards Board (FASB) Staff Position 157-2, Effective Date of FASB Statement No.157 (FSP 157-2). FSP 157-2 delayed until the beginning of the first quarter of fiscal 2009 the effective date of Statement of Financial Accounting Standards (SFAS) No.157, Fair Value Measurement, for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of FSP 157-2 on January1, 2009 did not have a material impact on the Companys consolidated financial statements. On January1, 2009, the Company adopted FSP Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions in FSP EITF 03-6-1. The adoption of FSP EITF 03-6-1 did not have a material impact on the Companys consolidated financial statements. On January1, 2009, SFAS No.141 (revised 2007), Business Combinations, (SFAS No.141R), became effective for the Company. SFAS No. 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS No.141R may have a material impact on the Companys consolidated financial statements if or when it enters into any business combinations in the future. In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, (FSP FAS 107-1). FSP FAS 107-1 amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. FSP FAS 107-1 also amends APB 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. FSP FAS 107-1 is effective for periods ending after June15, 2009. The adoption of FSP FAS 107-1 did not have a material impact on the Companys consolidated financial statements. In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly (FSP FAS 157-4). FSP FAS 157-4 clarifie |
| 3. Business Acquisition | 3. Business Acquisition aCerno In November 2008, the Company acquired all of the outstanding common and preferred stock of the parent entity of aCerno, Inc. (acerno) including vested stock options, in exchange for approximately $89.5 million in cash paid in 2008 and in the first quarter of 2009. The purchase of acerno was intended to augment Akamais Internet advertising-related offerings, which are designed to help customers more effectively target online advertising to the desired audience. The aggregate purchase price of $90.8 million consisted of $89.5 million in cash and $1.3 million of transaction costs, which primarily consisted of fees for legal and financial advisory services. The acquisition of acerno was accounted for using the purchase method of accounting. The results of operations of the acquired business have been included in the consolidated financial statements of the Company since November3, 2008, the date of acquisition. The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, as determined by management and, with respect to identifiable intangible assets, by management with the assistance of an appraisal provided by a third-party valuation firm. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed was recorded as goodwill. The value of the goodwill from this acquisition can be attributed to a number of business factors including, but not limited to, potential sales opportunities to provide Akamai services to acerno customers; a trained technical workforce in place in the United States; an existing sales pipeline and a trained sales force. In accordance with current accounting standards, goodwill associated with the acerno acquisition will not be amortized and will be tested for impairment at least annually as required by SFAS No.142, Goodwill and Other Intangible Assets. The following table presents the allocation of the purchase price for acerno: (Inthousands) Total consideration: Cash paid $ 89,520 Transaction costs 1,294 Total purchase consideration $ 90,814 Allocation of the purchase consideration: Current assets $ 5,249 Property and equipment 1,720 Identifiable intangible assets 19,400 Goodwill 80,901 Deferred tax liabilities (7,516 ) Other liabilities assumed (8,940 ) $ 90,814 The following were the identified intangible assets acquired and the respective estimated periods over which such assets will be amortized: Amount Weighted average useful life (Inthousands) (Inyears) Completed technologies $ 9,200 2.5 Customer relationships 4,300 4.1 Non-compete agreements 5,600 2.5 Trade names 300 1.5 Total $ 19,400 In determining the purchase price allocation, the Company considered, among other factors, its intention to use the acquired assets and the historical and estimated future demand for acerno ser |
| 4. Marketable Securities and Investments | 4. Marketable Securities and Investments The Company accounts for financial assets and liabilities in accordance with SFAS No.157, Fair Value Measurements (SFAS No.157). SFAS No.157 provides a framework for measuring fair value under generally accepted accounting principles in the United States and requires expanded disclosures regarding fair value measurements. SFAS No.157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No.157 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1Quoted prices in active markets for identical assets or liabilities. Level 2Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques. The following is a summary of marketable securities and other investment-related assets held at June30, 2009 and December31, 2008 (in thousands). As of June30, 2009 Cost Gross Unrealized Other-than- temporary Impairment Gains (Losses) Aggregate FairValue ClassifiedonBalanceSheet Short-term Marketable Securities Long-term Marketable Securities Gains Losses Available-for-sale securities: Certificates of deposit $ 484 $ $ $ $ 484 $ 381 $ 103 Commercial paper 20,446 4 (7 ) 20,443 20,443 U.S.corporate debt securities 243,163 2,497 (141 ) 245,519 193,127 52,392 U.S.government agency obligations 82,160 351 (1 ) 82,510 75,334 7,176 Auction rate securities 203,500 (23,211 ) 180,289 180,289 549,753 2,852 (23,360 ) 529,245 289,285 239,960 Trading securities: Auction rate securities 76,450 (9,658 ) 66,792 66,792 Other investment-related assets: Put option related to auction rate securities 9,658 9,658 9,658 $ 626,203 $ 2,852 $ (23,360 ) $ $ 605,695 $ 298,943 $ 306,752 |
| 5. Accounts Receivable | 5. Accounts Receivable Net accounts receivable consisted of the following (in thousands): June30, 2009 December31, 2008 Trade accounts receivable $ 137,553 $ 138,286 Unbilled accounts 23,524 12,596 Gross accounts receivable 161,077 150,882 Allowance for doubtful accounts (10,021 ) (6,943 ) Reserve for cash-basis customers (6,519 ) (4,327 ) Total accounts receivable reserves (16,540 ) (11,270 ) Accounts receivable, net $ 144,537 $ 139,612 The Companys accounts receivable balance includes unbilled amounts that represent revenues recorded for customers that are typically billed monthly in arrears. The Company records reserves against its accounts receivable balance. These reserves consist of allowances for doubtful accounts and reserves for cash-basis customers. Increases and decreases in the allowance for doubtful accounts are included as a component of general and administrative expenses. The Companys reserve for cash-basis customers increases as services are provided to customers where collection is no longer assured. Increases to the reserve for cash-basis customers are recorded as reductions of revenues. The reserve decreases and revenue is recognized when and if cash payments are received. Estimates are used in determining these reserves and are based upon the Companys review of outstanding balances on a customer-specific, account-by-account basis. The allowance for doubtful accounts is based upon a review of customer receivables from prior sales with collection issues where the Company no longer believes that the customer has the ability to pay for services previously provided. The Company also performs ongoing credit evaluations of its customers. If such an evaluation indicates that payment is no longer reasonably assured for services provided, any future services provided to that customer will result in the creation of a cash-basis reserve until the Company receives consistent payments. The Company does not have any off-balance sheet credit exposure related to its customers. For presentation on the balance sheet at December31, 2008, the Company reduced customer accounts receivable balances and deferred revenue by the amount of any deferred revenue recorded for customers that had a balance receivable. The reduction as of December31, 2008 totaled $22.2 million. Beginning in the quarter ended March31, 2009, the Company ceased to record such reduction for balance sheet presentation and now only records a reduction of customers accounts receivable balances for the amount of any deferred revenue related to services that have not yet commenced and any deferred revenue for customers from which collection is not reasonably assured. The actual reported deferred revenue on the balance sheet at December31, 2008 was $12.8 million. That amount would have been $30.1 million if the new presentation had been applied at December31, 2008. |
| 6. Accrued Expenses and Other Current Liabilities | 6. Accrued Expenses and Other Current Liabilities Accrued expenses consisted of the following (in thousands): June30, 2009 December31, 2008 Payroll and other related benefits $ 19,924 $ 26,377 Bandwidth and co-location 17,133 16,642 Property, use and other taxes 342 13,317 Legal professional fees 1,224 1,475 Other 2,796 8,321 Total $ 41,419 $ 66,132 |
| 7. Net Income per Share | 7. Net Income per Share Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common stock. Potential common stock consists of shares issuable pursuant to stock options, deferred stock units, restricted stock units (RSUs) and convertible notes. The following table sets forth the components used in the computation of basic and diluted net income per common share (in thousands, except per share data): Forthe ThreeMonthsEnded June30, Forthe SixMonthsEnded June30, 2009 2008 2009 2008 Numerator: Net income $ 36,007 $ 34,334 $ 73,088 $ 71,245 Add back of interest expense on 1% convertible senior notes, net of tax 440 434 866 860 Numerator for diluted net income $ 36,447 $ 34,768 $ 73,954 $ 72,105 Denominator: Denominator for basic net income per common share 172,561 167,417 171,540 166,688 Effect of dilutive securities: Stock options 3,129 4,871 2,791 5,198 Effect of escrow contingencies 347 810 347 810 RSUs and deferred stock units 583 1,616 1,256 1,870 Assumed conversion of 1% convertible senior notes 12,936 12,927 12,936 12,927 Denominator for diluted net income per common share 189,556 187,641 188,870 187,493 Basic net income per common share $ 0.21 $ 0.21 $ 0.43 $ 0.43 Diluted net income per common share $ 0.19 $ 0.19 $ 0.39 $ 0.38 Outstanding options to acquire an aggregate of 3.0million and 1.6million shares of common stock for the three months ending June30, 2009 and 2008, respectively, were excluded from the calculation of diluted earnings per share because the exercise prices of these stock options were greater than the average market price of the Companys common stock during the respective periods. Similarly, outstanding options to acquire an aggregate of 3.2 million and 1.6million shares of common stock for the six months ending June30, 2009 and 2008, respectively, were excluded from the calculation of diluted earnings per share because the exercise prices of these stock options were greater than the average market price of the Companys common stock during the respective periods. Additionally, 3.3million and 2.6million shares of common stock issuable in respect of outstanding performance-based RSUs were excluded from the computation of diluted net income per share for the three and six months ended June30, 2009 and 2008, respectively, because the performance conditions had not been met as of those dates. The calculation of assumed proceeds used to determine the diluted weighted average shares outstanding under the treasury stock method in the periods presented was adjusted by ta |
| 8. Stockholders' Equity | 8. Stockholders Equity Stock Repurchase Program On April29, 2009, the Company announced that its Board of Directors had authorized a stock repurchase program permitting purchases of up to $100 million of the Companys common stock from time to time on the open market or in privately negotiated transactions. The timing and amount of any shares repurchased will be determined by the Companys management based on its evaluation of market conditions and other factors. The Company may choose to suspend or discontinue the repurchase program at any time. During the three months ended June30, 2009, the Company repurchased 713,200 shares of its common stock for $15.0 million. As of June30, 2009, the Company had $85.0 million available for future purchases of shares under its repurchase program. Additionally, as of June30, 2009, the Company had prepaid $1.9 million for purchases of its common stock which had a settlement date in early July 2009. Stock-Based Compensation Expense The following table summarizes the components of total stock-based compensation expense included in the Companys consolidated statements of operations for the three and six months ended June30, 2009 and 2008 (in thousands): Forthe ThreeMonthsEnded June30, Forthe SixMonthsEnded June30, 2009 2008 2009 2008 Stock-based compensation expense by type of award: Stock options $ 4,429 $ 5,468 $ 9,277 $ 11,640 Deferred stock units 2,085 1,885 2,085 1,885 RSUs 7,187 10,667 18,327 16,454 Shares issued under the Employee Stock Purchase Plan 863 897 1,850 1,860 Amounts capitalized as internal-use software (1,244 ) (1,920 ) (3,152 ) (3,591 ) Total stock-based compensation before income taxes 13,320 16,997 28,387 28,248 Less: Income tax benefit (5,055 ) (5,133 ) (11,072 ) (8,550 ) Total stock-based compensation, net of taxes $ 8,265 $ 11,864 $ 17,315 $ 19,698 Effect of stock-based compensation on income by line item: Cost of revenues $ 489 $ 599 $ 1,050 $ 1,165 Research and development expense 2,223 2,662 4,949 5,110 Sales and marketing expense 6,024 7,104 13,064 12,053 General and administrative expense 4,584 6,632 9,324 9,920 Provision for income taxes (5,055 ) (5,133 ) (11,072 ) (8,550 ) Total cost related to stock-based compensation, net of taxes $ 8,265 $ 11,864 $ 17,315 $ 19,698 In addition to the amounts of stock-based compensation reported in the table above, the Companys consolidated statements of operations for the three and six months ended June30, 2009 also included stock-based compensation reflected as a component of amortization of capitalized internal-use software; such addition |
| 9. Comprehensive Income | 9. Comprehensive Income The following table presents the calculation of comprehensive income and its components (in thousands): For the Three Months Ended June30, For the Six Months Ended June30, 2009 2008 2009 2008 Net income $ 36,007 $ 34,334 $ 73,088 $ 71,245 Other comprehensive income (loss): Foreign currency translation adjustments 3,527 (497 ) 1,064 921 Change in unrealized gain (loss) on investments, net 5,552 (1,382 ) 17,608 (17,120 ) Income tax (expense) benefit related to unrealized gain (loss) on investments, net (2,151 ) 731 (6,822 ) 6,436 Other comprehensive income (loss) 6,928 (1,148 ) 11,850 (9,763 ) Comprehensive income $ 42,935 $ 33,186 $ 84,938 $ 61,482 Accumulated other comprehensive loss, net consisted of (in thousands): June30, 2009 December31, 2008 Foreign currency translation adjustment $ 62 $ (1,002 ) Net unrealized loss on investments, net of taxes (12,562 ) (23,348 ) Total accumulated other comprehensive loss, net $ (12,500 ) $ (24,350 ) |
| 10. Goodwill and Other Intangible Assets | 10. Goodwill and Other Intangible Assets The Company recorded goodwill and other intangible assets as a result of business acquisitions that occurred from 2000 through 2008. The Company also acquired license rights from the Massachusetts Institute of Technology in 1999. During the six months ended June30, 2009, the Company made purchase accounting adjustments affecting goodwill of $0.6 million to reflect the final determination of the fair value of assumed liabilities and assets in connection with the acquisition of acerno. Other intangible assets that are subject to amortization consist of the following (in thousands): June30, 2009 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Completed technology $ 35,031 $ (8,230 ) $ 26,801 Customer relationships 88,700 (36,433 ) 52,267 Non-compete agreements 7,200 (2,169 ) 5,031 Trademarks 800 (381 ) 419 Acquired license rights 490 (490 ) Total $ 132,221 $ (47,703 ) $ 84,518 December31, 2008 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Completed technology $ 35,031 $ (5,659 ) $ 29,372 Customer relationships 88,700 (31,291 ) 57,409 Non-compete agreements 7,200 (1,529 ) 5,671 Trademarks 800 (257 ) 543 Acquired license rights 490 (490 ) Total $ 132,221 $ (39,226 ) $ 92,995 Aggregate expense related to amortization of other intangible assets for the three months ended June30, 2009 and 2008 was $4.2 million and $3.5 million, respectively. For the six months ended June30, 2009 and 2008, aggregate expense related to amortization of other intangible assets was $8.5 million and $7.1 million, respectively. Based on the Companys other intangible assets as of June30, 2009, aggregate expense related to amortization of other intangible assets is expected to be $8.2 million for the remainder of 2009, and $16.4 million, $16.4 million, $15.4 million and $12.6 million for fiscal years 2010, 2011, 2012 and 2013, respectively. |
| 11. Concentration of Credit Risk | 11. Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, marketable securities and accounts receivable. The Company maintains the majority of its cash, cash equivalents and marketable securities balances principally with domestic financial institutions that the Company believes are of high credit standing. At June30, 2009 and December31, 2008, the Company held ARS, with an estimated fair value of $247.1 million and $237.0 million, respectively, that have experienced failed auctions, which have prevented the Company from liquidating those investments. As a result, the Company has classified these investments as long-term marketable securities on its consolidated balance sheet as of June30, 2009. Based on its ability to access its cash and short-term investments and its expected cash flows, the Company does not anticipate the current lack of liquidity with respect to these ARS to have a material impact on its financial condition or results of operations during 2009. As of June30, 2009, the Company had recorded a pre-tax cumulative unrealized loss of $23.2 million related to the temporary impairment of the ARS, which was included in accumulated other comprehensive loss on its consolidated balance sheet. See Note 4. Concentrations of credit risk with respect to accounts receivable are limited to certain customers to which the Company makes substantial sales. The Companys customer base consists of a large number of geographically dispersed customers diversified across numerous industries. To reduce risk, the Company routinely assesses the financial strength of its customers. Based on such assessments, the Company believes that its accounts receivable credit risk exposure is limited. No customer accounted for 10% or more of accounts receivable as of June30, 2009 or as of December31, 2008. The Company believes that, at June30,2009, concentration of credit risk related to accounts receivable is not significant. |
| 12. 1% Convertible Senior Notes | 12. 1% Convertible Senior Notes As of June30, 2009, the carrying amount and fair value of the Companys 1% convertible senior notes were $199.9 million and $266.8 million, respectively. The initial, and current, conversion price of the 1% convertible senior notes is $15.45 per share (equivalent to 64.7249 shares of common stock per $1,000 principal amount of 1% convertible senior notes). The conversion price is subject to adjustment in certain events. The Company may redeem the 1% convertible senior notes on or after December15, 2010 at the Companys option at 100% of the principal amount together with accrued and unpaid interest. Conversely, holders of the 1% convertible senior notes may require the Company to repurchase all or a portion of such notes at 100% of the principal amount plus accrued and unpaid interest on certain specified dates beginning on December15, 2010. In the event of a change of control of the Company, the holders may require Akamai to repurchase all or a portion of such 1% convertible senior notes at a repurchase price of 100% of the principal amount plus accrued and unpaid interest. Interest on the 1% convertible senior notes began to accrue as of the issue date and is payable semiannually on June15 and December15 of each year. The 1% convertible senior notes are senior unsecured obligations and are the same rank as all existing and future senior unsecured indebtedness of Akamai. The 1% convertible senior notes rank senior to all of the Companys subordinated indebtedness. Deferred financing costs of $5.9 million, including the initial purchasers discount and other offering expenses, for the 1% convertible senior notes are being amortized over the first seven years of the term of these notes to reflect the put and call rights discussed above. Amortization of deferred financing costs of the 1% convertible senior notes was $210,000 and $420,000 each for the three and six-month periods ended June30, 2009 and 2008. Using the effective interest method, the Company records the amortization of deferred financing costs as interest expense in the consolidated statement of operations. |
| 13. Segment and Geographic Information | 13. Segment and Geographic Information Akamais chief decision-maker, as defined under SFAS No.131, Disclosures About Segments of an Enterprise and Related Information, (SFAS No.131) is the Chief Executive Officer and the executive management team. As of June30, 2009, Akamai operated in one industry segment: providing services for accelerating and improving the delivery of content and applications over the Internet. The Company is not organized by market and is managed and operated as one business. A single management team that reports to the Chief Executive Officer comprehensively manages the entire business. The Company does not operate any material separate lines of business or separate business entities with respect to its services. Accordingly, the Company does not accumulate discrete financial information with respect to separate product lines and does not have separately reportable segments as defined by SFAS No.131. The Company deploys its servers into networks worldwide. As of June30, 2009, the Company had $139.4 million and $35.3 million of property and equipment, net of accumulated depreciation, located in the United States and in foreign locations, respectively. As of December31, 2008, the Company had $138.6 million and $35.9 million of property and equipment, net of accumulated depreciation, located in the United States and in foreign locations, respectively. Akamai sells its services through a direct sales force and channel partners located both in the United States and certain foreign locations. For both the three and six months ended June30, 2009, approximately 28% of revenues were derived from the Companys operations outside the United States, including 17% from Europe. For the three and six months ended June30, 2008, approximately 26% and 25% of revenues, respectively, was derived from the Companys operations outside the United States, including 19% and 18%, respectively, from Europe during such periods. No single country outside the United States accounted for 10% or more of revenues during these periods. For the three and six months ended June30, 2009 and 2008, no customer accounted for 10% or more of total revenues. |
| 14. Income Taxes | 14. Income Taxes The Companys effective income tax rate, including discrete items, was 39.0% and 39.4% for the six months ended June30, 2009 and 2008, respectively. The effective income tax rate is based upon the estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods for settlements of tax audits or assessments, the resolution or identification of tax position uncertainties, and acquisitions of other companies. The discrete items also include the tax effect of disqualifying dispositions of incentive stock options and shares purchased under the ESPP. For the six months ended June30, 2009 and 2008, the effective income tax rates were higher than the federal statutory tax rate mainly due to the effects of accounting for stock-based compensation in accordance with SFAS No.123(R), Share-Based Payment, and state income tax expense. |
| 15. Commitments, Contingencies and Guarantees | 15. Commitments, Contingencies and Guarantees Operating Lease Commitments The Company leases its facilities under non-cancelable operating leases. These operating leases expire at various dates through December 2019 and generally require the payment of real estate taxes, insurance, maintenance and operating costs. As of June1, 2009, the Company is occupying an additional 110,000 square feet at its current location in Cambridge. These lease obligations have been included in the future lease commitment table below. The expected minimum aggregate future obligations under non-cancelable leases as of June30, 2009 were as follows (in thousands): Operating Leases Remaining 2009 $ 8,764 2010 21,275 2011 18,713 2012 17,721 2013 17,259 Thereafter 90,158 Total $ 173,890 Purchase Commitments The Company has long-term commitments for bandwidth usage and co-location services with various network and Internet service providers. For the remainder of 2009 and for the years ending December31, 2010, 2011 and 2012, the minimum commitments pursuant to these contracts in effect as of June30, 2009, are $35.4 million, $19.3 million, $0.7 million and $0.3 million, respectively. As of June30, 2009, the Company had entered into purchase orders with various vendors for aggregate purchase commitments of $33.6 million, which are expected to be paid over the next twelve months. Litigation Between July2, 2001 and November7, 2001, purported class action lawsuits seeking monetary damages were filed in the U.S. District Court for the Southern District of New York against the Company as well as against the underwriters of its October28, 1999 initial public offering of common stock. The complaints were filed allegedly on behalf of persons who purchased the Companys common stock during different time periods, all beginning on October28, 1999 and ending on various dates. The complaints are similar and allege violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, primarily based on the allegation that the underwriters received undisclosed compensation in connection with the Companys initial public offering. On April19, 2002, a single consolidated amended complaint was filed, reiterating in one pleading the allegations contained in the previously filed separate actions. The consolidated amended complaint defines the alleged class period as October28, 1999 through December6, 2000. A Special Litigation Committee of the Companys Board of Directors authorized management to negotiate a settlement of the pending claims substantially consistent with a Memorandum of Understanding that was negotiated among class plaintiffs, all issuer defendants and their insurers. The parties negotiated a settlement that was subject to approval by the Court. On February15, 2005, the Court issued an Opinion and Order preliminarily approving the settlement, provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. The parties agreed to a modification narrow |
Document Information
| Document Information | |
| 6 Months Ended
Jun. 30, 2009 USD / shares | |
| Document Information [Text Block] | |
| Document Type | 10-Q |
| Amendment Flag | false |
| Amendment Description | N.A. |
| Document Period End Date | 2009-06-30 |
Entity Information
| Entity Information (USD $) | |||
| 6 Months Ended
Jun. 30, 2009 | Aug. 05, 2009
| Jun. 30, 2008
| |
| Entity [Text Block] | |||
| Trading Symbol | AKAM | ||
| Entity Registrant Name | AKAMAI TECHNOLOGIES INC | ||
| Entity Central Index Key | 0001086222 | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Well-known Seasoned Issuer | Yes | ||
| Entity Current Reporting Status | Yes | ||
| Entity Voluntary Filers | No | ||
| Entity Filer Category | Large Accelerated Filer | ||
| Entity Common Stock, Shares Outstanding | 172,401,167 | ||
| Entity Public Float | $5,674,700,000 |