After its IPO in October 1999, Akamai’s stock soared and swooped with the tidal wave of tech stocks. It rose to a dizzying $345 a share – but is currently skating in the trough at around $4. ‘When they ask what the valuation should be I say more than $8 and less than $345,’ investor relations officer Steven Wolfe quips.
It indicates a very urbane attitude on the part of the investment community that instead of burying the messenger, they praise him to high heaven. They rated Akamai number one in three categories and cited the company for numerous other areas of their IR program at the Investor Relations Magazine US Awards 2001.
Specifically, in the small-cap league (under $2.5 bn in market cap), Akamai won for best investment community meetings and best use of conferencing, and rated highest among small-caps for corporate advertising to the investment community. The company also garnered honorable mentions in the Grand Prix for best overall investor relations and best IRO categories, while being mentioned for senior management communications and use of technology. ‘It caught us off guard – it was very surprising,’ Wolfe admits. However, not much does catch Akamai off guard, hence its high rating. And the performance is not as counterintuitive as it might seem in light of Akamai’s current stock price.
Wolfe engagingly confesses his background gives him ‘a unique entre’ to IR. ‘I’m a little bit of a fish out of water,’ the Yankees fan says of the distance from Akamai’s Boston headquarters to his home stadium. ‘It’s tough.’ However, he and CFO Tim Weller brought more than a passion for baseball from New York, and Akamai can say, ‘Investors “R” us.’ Weller is a former DLJ analyst and Wolfe is an ex-investment banker. Their IR is based on extensive experience of what investors want to know.
Nor is it based purely on past experience. Wolfe doesn’t just howl at the moon when someone sells, he actively hunts out the reason why. ‘We aren’t heavy-handed about it – it’s just a case of information flow. So if someone’s selling, I’m not going to get upset, but I want to know why, the same way I want to know why someone bought. I need that information, so we can do a better job next time we’re at a conference or on the road.’
Wolfe and Weller can make the most of their professional links: ‘We can call up sell-side analysts and portfolio managers and have a better understanding of their concerns,’ which is why he says with no false modesty, ‘We often get complimented on the information and metrics that we put out in our quarterly conference.’ Indeed the analysts Investor Relations spoke to corroborate this.
Akamai history
There is much to explain about Akamai. In a classic brains-to-bucks start, Tim Berners Lee, inventor of the world wide web, threw out a problem to Professor Tom Leighton, head of the algorithms group in MIT’s computer science lab: how to overcome the ‘flash crowds’ that surge towards cyber-events like contested presidential election results and even more revealing figures like Victoria’s Secret unveilings. Could the usually consequent overloading and crashing be avoided?
Leighton and PhD candidate Danny Lewin came up with the mathematical algorithms needed, and that research project became Akamai in 1998. The answer was to deliver the content and applications from the edge of the network. Just as the reflex action to a tap on the knee comes from the base of the spine rather than the brain, distributed computing systems take internet responses closer to end users. That is why Akamai has over 12,000 servers in 62 countries on over 820 networks, creating a unified platform that continuously develops millions of lines of source code. Or, as Wolfe puts it, ‘Akamai provides data application and content delivery services. We provide performance, reliability and scalability for all kinds of content and applications to be delivered over an IP platform like the internet.’
Backed by venture capital from Apple, Microsoft and Cisco, the company was launched commercially in April 1999, and went public six months later – just in time to ride the highs and lows of the tech tsunami. Wolfe joined a mere month before the IPO to work in the international business development group. His task was to cut strategic deals with the large telecommunication network carriers in Europe and Latin America, including groups like Telefonica and France Telecom.
‘All of them found Akamai’s content delivery service to be a very disruptive technology and were unsure of how to react at first, but then they decided to partner with us,’ Wolfe reminisces. Until then, CFO Weller had carried the IR burden. Eventually Wolfe, as director of corporate strategy, added IR to his portfolio.
Now, says Wolfe, ‘We have a department of two – myself and our IR associate, Shannon Altimari. We try to be as interchangeable as possible. She steps in and services retail investors, sell-side analysts and institutions. In fact there are three of us, with Tim Weller. People still call him about the company and the sector, or about technology.’ Indeed, since the company straddles two sectors, software and networking, it is perhaps over-blessed with info-hungry analysts. Akamai has over 30 sell-side analysts covering it, plus hundreds of buy-siders, and they all expect – and seem to get – insight into the industry as well as the company.
There are no specific programs for retail investors, though Wolfe produces straightforward educational pieces about the internet and e-mails white papers. Akamai also ensures that a lot of its conference calls are streamed over the web in audio and video. Indeed CCBN, one of the principal IR distribution channels for streaming technology, is an Akamai partner that uses the company’s product to webcast the conferences for thousands of companies. ‘The web site is also key to distributing information to our investor base. We want to make it as self-service as possible. People are deluged with information from companies, and I get people asking to be taken off our e-mail list since they can download releases from Yahoo if they want.’
The company’s shareholder base is about 30 percent institutional, with another 30 percent made up of management and the original venture capitalists. Wolfe is targeting overseas investors, with the hope that they will soon reach 30 percent as well. The company has 17 offices worldwide, which make useful bases for management one-on-ones and conferences. Playing a large IR role are Akamai’s offices in London, Paris and Munich; and there’s a new joint venture in Japan with SoftBank, which gives the company a chopstick in the IR bowl there.
Model marriage
‘I’m very focused on getting long-term holders who understand the path that we are going down,’ Wolfe says. ‘It’s a complicated and unique story since we are marrying the best aspects of a software model with the best of a network or telecom business model which gives you a high recurring revenue with very high operating leverage.’
To begin with, Akamai’s institutional investors were growth- and tech-oriented, but now value investors are looking at the stock. Wolfe is not discouraging them. ‘They are looking for the companies that are going to be survivors. When else are you going to get into Ciscos or Akamais at this cost?’
They also want to know, Wolfe says, ‘Is this a management team that’s going to be able to steer through the storm? Will we make them feel safe at night that their money is in this company? Why should they buy stock if they haven’t met management or don’t understand what we do? You need to give people reason to own a stock, and in times when companies are challenged by the economy, they have to meet management and look in the whites of their eyes.’
So, the distributed human IR network includes CFO Tim Weller, CEO George Conrades, president Paul Sagan, COO Chris Schoettle, co-founder and VP of corporate strategy Jonathan Seelig, and chief network architect Avi Freedman, who has spent a lot of time on the road, in the US and abroad.
Analysts respond well to the periodic company visit, known as the Meet Akamai Day, which takes place roughly once a month. At first sight, a visit to see a building full of people composing source code may not sound particularly interesting. However, when as many as several hundred investors assemble to pick the brains of the management in an interactive event, this can produce a pretty stimulating experience. Our evidence for that? It was spontaneously mentioned by every analyst we spoke to for this scrutiny of Akamai’s IR.
What the analysts say
Sanjay Puri, Thomas Weisel Partners
Puri attributes Wolfe’s ability to know how investors think to his banking background. ‘He also knows what it means to run a business. He really understands what the sell side and buy side need to understand, and he also knows as director of business development what strategic issues Akamai needs to address to grow the business and move to profitability. He knows all the constituencies and the macro environment the industry is moving in.’
As an IRO, Wolfe has unique qualities. ‘He has developed great dialog with investors, has earned a lot of respect, and carries himself off very professionally,’ Puri adds. ‘If Akamai makes an announcement, he’s on the phone immediately, wanting to know what color he can add to the picture – obviously always within the confines of Reg FD.’ And, he points out, Wolfe is not alone: ‘Between Conrades, Weller and Sagan, it’s a very well run management team from a corporate standpoint.’
Anonymous
A buy-side analyst speaks anonymously but is nonetheless uninhibited in her praise for Akamai: ‘It’s a great department, really quick to respond, which is not always the case with other companies. Akamai comes back within a day, sometimes an hour.
They really make themselves very available. Wolfe takes time to explain to investors, who don’t always find it easy to understand all the technology. He’s not just repeating what he’s been told to say, there’s actually some thought behind it. Sometimes IR departments refer questions to others. He knows the answers – there’s never been a question that he can’t answer.’
Losing a founder, saving the internet
One of Akamai’s greatest tests – both for its technology and its employees – came on September 11. The company’s co-founder and chief technology officer, Danny Lewin, was aboard one of the hijacked planes that crashed into the World Trade Center. ‘He was the man who pretty much came up with the vision that helped build the company that truly saved the internet on September 11. The events of this day took his life, but those events also proved our value proposition in cyberspace,’ Wolfe attests.
On that day, when millions of people logged onto news sites for information, Akamai’s internet-overlay technology helped the web sites of MSNBC, CNN and ABC – not to mention the FBI’s own site – handle record-high traffic by channeling web page requests to mirror sites on servers around the world. The technology’s performance ‘is certainly what Danny would have wanted. He was an incredibly passionate individual with a huge personality. He was very aggressive, and this is what he would have wanted,’ Wolfe states.
