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Wednesday, February 6, 2008

AKAM Q4:2007 Results (2)

"Let me share some thoughts with you about 2008. When we spoke with you last fall, we guided to 25 to 30% growth for 2008. Given our strong fourth quarter, this implies a higher revenue number, so we are raising our 2008 full year revenue guidance to between 800 and $825 million, or 26 to 30% annual growth we expect our normalized net income to grow in line with or slightly faster than our revenue growth or 27 to 31% on a year-over-year basis. This implies normalized EPS in 2008 of $1.65 to $1.70, or 25 to 29% annual growth. On margins, overall we expect to see the same gross margin trend downward in 2008 as we have in the last few years, although at a slower rate, with the gross margin declines being offset by EBITDA improvements. Specifically, we expect cash gross margins to decline by roughly 2 points this year, while EBITDA margins will expand by roughly 2 points. Given the opportunities we see in this high growth market, we want to ensure that we are making the appropriate levels of investment in 2008 to drive our future performance, and we expect to continue to add resources to support our growth."

So they're saying the EBITDA margins will decline slower than gross margins, which is good. Revenue estimates will rise slightly in line w/ the beat for the quarter. They're saying the right things so far so I'd assume the stock isn't going to fall apart here.

In my opinion the risk/reward is still skewed to the downside at this level as this won't be enough to send the stock soaring through its resistance at $34. It will probably trade $32.3 (the "attraction spot" on the chart) at some point.

I like the story longer-term but this isn't the right price to buy it.

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