Akamai Files for $86m IPO

Computergram International, August 24, 1999

Akamai Technologies Inc, the Cambridge, Massachusetts-based supplier of internet content acceleration technology has filed for its initial public offering, hoping to raise up to $86.3m before expenses.

Akamai has developed software called FreeFlow, which when placed on servers at the edge of the networks that comprise the internet, accelerates the delivery of web content using an algorithm. It makes money by charging content providers, such as Yahoo! Inc and CNN Interactive to house their content on their servers round the world. Content providers are charged by the megabit, starting at $2,000 per megabit per second, with discounts for volume usage. Some of the technology is licensed from Massachusetts Institute of Technology (MIT), where some of the executives developed it.

At present the service delivers static HTML content, but the company plans to introduce streaming audio and video in the near future, which will be aided by the company' strategic agreement with Apple Computer Inc, which was signed in June but announced last week. Apple invested $12.5m in Akamai as part of that deal and it secured $49m from Cisco Systems Inc last week.

At the end of July this year the company had deployed 900 servers in 15 countries across 25 networks, including AboveNet Communications, AT&T, Digex, Exodus Communications and GTE Internetworking. The company does not derive revenue from placing the server on the network, but it is mutually beneficial because the ISP gets a faster network and Akamai gets a chance to offer its service to content providers.

The S-1 filing warns that in the quarter ending June 30, one customer accounted for 75% of the revenues and another one for 14%, but the company could not identify those customers yesterday due to its quiet-period restrictions. In the six months to June 30 the company recorded net losses of $10.1m on revenues of $403,949, having started recording revenues in April.