Zacks_Analysts' Blog : Akamai Wins Diesel Deal - Analyst Blog

A global provider of distributed e-business infrastructure services and solutions, Akamai Technologies Inc. (AKAM) announced that its Dynamic Site Accelerator and Media Delivery solutions has been selected by Diesel, the international lifestyle brand.

Akamai’s solution will help Diesel accelerate and provide the contents of its newly launched website to customers globally and enable users with a superior online shopping experience.

The Dynamic Site Accelerator provides global delivery, load balancing and storage of content and applications. It focuses on valuable resources on strategic matters, rather than on technical infrastructure issues. The Akamai Media Delivery solution provides media content on behalf of its customers.

Akamai’s Dynamic Site Accelerator will help Diesel speedily and effectively distribute the website's content worldwide, while the Akamai Media Delivery solution will enable Diesel to deliver a rich media content at a much faster rate.

The current win will help expand Akamai’s already existing partnership with Diesel. Diesel had previously selected Akamai's solutions in April 2009 to accelerate its website content.

Akamai provides customers more user-friendly solutions by addressing bandwidth constraints and Internet traffic jams while delivering content directly to the end-user. This reduces the need for additional hardware to manage traffic loads and enables customers to host more content-rich sites than they would be able to with traditional delivery technologies.

We believe Akamai’s solutions should help grow its customer base and increase sales to existing customers, thereby driving growth over the long term. According to Gartner, the market for application acceleration spending is projected to grow to $3.3 billion by year-end 2010.

We continue to maintain a Neutral rating on a long-term basis (6-12 months) due to higher operating expenses, increasing capital expenditure and sluggish macroeconomic conditions.

Moreover, Akamai continues to face stiff competition from large companies, such as Level 3 Communications Inc. (LVLT) and Limelight Networks, Inc. (LLNW).

However, we believe the greater usage of cloud computing technology, higher adoption of value-added solutions, aggressive share repurchase and an anticipated strong holiday season will drive the stock in the near term.

Currently, Akamai has Zacks #3 Rank, which implies a Hold rating on a short-term basis. We expect Akamai to report in line fourth quarter results, given the lack of analysts’ estimate revisions.