Content delivery specialist Akamai Technologies, which pioneered the business of speeding content across the Internet, is cutting more than a quarter of its workforce as it strives for profitability in the sluggish economy.
The company says it will reduce its 789-strong workforce by about 29 percent and plans to end the year with about 550 employees. The news comes as Akamai executives tighten their focus on serving enterprise customers' dynamic content delivery needs with the company's EdgeSuite service.
"With the economy continuing to put negative pressure on high-tech spending, we've taken a hard look at the markets and customers that we choose to serve," Akamai CEO George Conrades said during a conference call with financial analysts. "We are strengthening our primary focus on our EdgeSuite service, including the exciting potential we see for edge computing."
Akamai still sells its FreeFlow static content delivery service, as well as streaming services, but has seen growing demand for EdgeSuite, Conrades says. He says EdgeSuite contracts accounted for 39 percent of revenues in the third quarter, compared to just 27 percent of revenues in the first quarter of this year. Akamai signed 32 new EdgeSuite customers in the third quarter and now has a total of 243 businesses using the service, including Adidas-Salomon AG, FedEx Corp., America Online Inc. and FOXSports.com.
Conrades says the adoption of EdgeSuite among enterprise customers is giving Akamai a solid base to cushion the company as it continues to lose the dotcom customers it initially built its business serving. He says new monthly recurring sales for the third quarter exceeded churn from lost monthly recurring sales for the first time since the first quarter of last year.
Total revenues for the third quarter were US$35.4 million, compared to $42.8 million during the same time a year ago. Net losses, narrowed a bit from the year ago quarter at $47.5 million, or 42 cents per share, compared to $55.4 million, or 53 cents per share.
Capital expenditures for the quarter were $7 million, including a $4.4 million one-time charge to move Akamai's headquarters. The move is expected to save Akamai about $9 million in annual lease expenses, the company says.
As for the workforce reduction, Conrades would not say where those cuts would come, only that they were "designed to preserve our investments in our direct sales and customer facing technical resources, as well as in [our] core engineering and network resources."
Those cuts are expected to save the company some $30 million annually, says Timothy Weller, Akamai's CFO.
Weller also announced that he would step down as CFO by the end of the year. A search for his replacement is underway, the company says.