Akamai Plans Purchases in Security, Networks to Boost Profit

Akamai Technologies Inc. (AKAM), frequently the target of takeover speculation, is preparing to make some acquisitions of its own to increase profit.

Akamai, which helps businesses deliver data more quickly over the Internet, is shopping for security and networking companies, said Willie Tejada, senior vice president and general manager of the company’s enterprise cloud unit. In security, he said he’s looking at firewall technology for Web applications.

Akamai’s customers, which include Apple Inc. (AAPL), MTV Networks and Verizon Wireless, depend on the company to keep websites running during peaks in demand -- for instance, during a major news event or product announcement. Akamai is betting it can make more money channeling that traffic if it sells extra services such as security.

“We’re interested if the tech set we can acquire can get us into a market in a faster than 12-month period,” Tejada said in an interview at Akamai’s satellite office in San Mateo, California. “Those two things -- security and networking -- are really the growth areas for Akamai.”

Akamai, with $1.2 billion in revenue in 2011, wants to add $100 million in annual sales from new businesses within three years. The company entered the security market last year, and Tejada said he’s satisfied with its progress, though the company doesn’t provide the unit’s sales figures.

Margins Narrow

Akamai, based in Cambridge, Massachusetts, could use a profit boost. Its adjusted profit margin shrank to 43 percent last quarter from 46 percent a year earlier. The figure excludes items such as interest, taxes and stock-based compensation.

Tejada named one company, Zscaler Inc., in describing what Akamai would be interested in, though the two sides aren’t in talks, he said. Akamai could also make purchases to expand geographically or to add talent, Tejada said.

Zscaler allows businesses to block viruses, prevent data loss and control bandwidth through the Internet, rather than forcing them to install software or hardware.

“There are a lot of different companies that are interested in what we’re doing,” said Rebecca MacDonald, vice president of marketing for Zscaler. She declined to comment on whether the company is discussing a sale with anyone.

Akamai was the subject of more buyout rumors than any other American company from 2005 through 2010, data compiled by Bloomberg show. Last October, a report in Business Insider fueled speculation that Google Inc. (GOOG) would take over Akamai. Two people familiar with the matter said then that the report was baseless.

Tejada said he knew of no discussions to sell Akamai.

Akamai shares fell 0.7 percent to $37.55 at the close in New York. The stock has gained 16 percent this year.

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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