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Survivor Akamai Technologies rises again

Globe's No. 1 prospering in post dot-com era

By Hiawatha Bray
Globe Staff / May 16, 2006
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When the dot-com mania of 1999-2000 turned into a stock market blood bath, true believers who held that ''the Internet is changing everything" insisted they weren't wrong. Just early.

Probably no local company better epitomizes the cycle than Akamai Technologies Inc. of Cambridge.

Six years ago it was the state's hottest Net stock. Four years ago, after its share price plummeted 99.8 percent, it was one of the most painful lessons for investors in irrational Internet exuberance.

Today, Akamai is The Globe 100 company of the year, the best-performing public company of 2005 in Massachusetts.

It's been a long ride down and a hard climb back for Akamai, whose stock still barely trades at one-tenth its 2000 record high of $345, adjusted for splits. But trading anywhere in the $30s may seem miraculous for a company whose stock fell as low as 56 cents in October 2002.

Back then, more than a few shocked survivors of the dot-com implosion figured Akamai was keeping the lights on from sheer force of habit, or until some hard-eyed investors refused to keep paying the light bill.

These days the lights are shining bright at Akamai's network operations center. On the wall of the mission-control-style ground floor of its Kendall Square headquarters, the lights glow on a digital image of a rotating Earth, thousands clustered around the east and west coasts of the United States, the islands of Japan, the historic cities of Europe, and the booming cities of China.

Each light represents an Akamai server, or specialized computer that delivers information over the Internet, and there are 18,000 spread around the world. Woven into a data network that rides atop the global Internet, the lights on the wall represent a system that helps deliver vast troves of digital information far more reliably than the World Wide Web. Put simply, the key service Akamai provides to Net users is to push copies of frequently downloaded Web content much closer to their homes and businesses, so pages download faster and video and sound stream more smoothly.

Akamai -- the name means cool and clever in Hawaiian -- began knitting this supernetwork together even as the overheated Internet economy of the 1990s began unraveling. But Akamai proved to be early, not wrong. Now lots of customers are logging onto the Akamai network, including one-fifth of the world's 500 largest businesses, eight of the 10 largest carmakers, more than 100 major Internet news services, and every branch of the US military.

''There's just a really booming volume of online content, and if you want really fast download and a good user experience, Akamai is the go-to company," said Jeff Van Rhee, an analyst at Craig-Hallum Capital Group LLC, an institutional investment firm based in Minneapolis.

Starz Entertainment Group LLC of Englewood, Colo., began a subscription service in mid-2004 that lets members download Hollywood movies to their computers, and tapped Akamai to handle getting billion-bit movies to subscribers 10 to 12 times a month.

''The thing about Akamai is you know they'll deliver," said Bob Greene, Starz's senior vice president of advanced services.

Last year, Akamai signed up 600 new customers, which helped drive a 35 percent increase in revenue, to $283 million. Profits doubled to $70.4 million from $34 million in 2004. Throw in a onetime income tax benefit of $257.5 million -- past losses that accountants now predict can be used to blunt taxes on future profits -- and Akamai's 2005 net income was $327.9 million, or $2.11 a share.

''We're as shocked as anybody about how nice the rebound's been," said Akamai chief executive Paul Sagan. Especially considering the disasters that befell the company five years ago.

On the darkest day in the company's history, Akamai proved the value of its business. Cofounder Daniel Lewin was killed aboard American Airlines Flight 11 when the jet was crashed into New York's World Trade Center during the Sept. 11, 2001, terrorist attacks. Akamai had lost one of its most valued leaders. But as people worldwide swarmed to the Internet for news, Akamai's traffic shot to three times its normal level.

Nobody had time to mourn.

''Everybody had to do a lot more to pitch in, at a time when we were all feeling very bad," said cofounder Tom Leighton, a professor of applied mathematics at Massachusetts Institute of Technology, where Lewin had been a graduate student. ''The event itself caused a lot of people to realize the value that Akamai could provide. It was a day we could prove ourselves."

The 9/11 attacks worsened an economic slump. Dozens of upstart dot-com companies born in the late-'90s Internet boom, Akamai's core customers, were the first to die.

But Akamai had developed products and services for the ''old economy," and industrial, retail, and service firms that had begun lumbering onto the Internet, with little e-commerce expertise, were happy to tap Akamai to run their key business applications on its network.

These days, the Internet's ''gee whiz" era is past. Most Americans go online nearly every day to shop or read the latest news. Businesses worldwide rely on the global network. And now the entertainment industry is flooding the Internet with downloadable music and movies, podcasts, and video blogs.

Sirius Satellite Radio Inc., for example, doesn't just relay Howard Stern from transmitters in space. Sirius also pumps 68 of its 125 audio streams over the Internet, with help from Akamai. ''We can save on our infrastructure by relying on Akamai," said Sirius chief information officer Bill Pratt. If Sirius tried to handle its audience though its own server farm, said Pratt, ''we would have to spend millions."

A little later than investors dreamed in 2000, an Internet boom is underway, and with real, paying customers.

''It's just exploding," said Mukul Krishna, industry manager for digital media for Frost & Sullivan Inc. in San Antonio. Thanks to years of effort, Krishna said, ''Akamai is finally reaping a lot of what it had sown earlier."

Hiawatha Bray can be reached at

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