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Analyst Blog

Akamai Technologies Inc ((AKAM - Free Report) ) continues to focus on strengthening its Cloud Networking Solutions through acquisitions. The company recently acquired Sunnyvale-based Soha Systems, which provides “enterprise secure access-as-a-service” solution. However, the terms of the deal were not disclosed.

Shares increased 1.7% to close at $54.64 on Oct 4.

Per Techcrunch, Soha had raised roughly $10 million from investors that included Andreessen Horowitz, Cervin Ventures, Menlo Ventures and Moment Ventures. Soha’s solution helps in improving security compliance while keeping content safe at the cloud (both public and hybrid systems).

Per Akamai “the deal is intended to enhance the firm's strategy in securing, protecting, and accelerating enterprise applications and services through cloud technology.” Soha is an important addition to the cloud networking suite product portfolio that already included technology from previous acquisitions like Bloxx (Oct 2015) and Prolexic (2013).

AKAMAI TECH Price and Consensus

 

AKAMAI TECH Price and Consensus | AKAMAI TECH Quote

Growing Demand for Security Solutions

With rapid adoption of cloud computing, security has become a major concern for enterprises. Hackers are using new and sophisticated techniques to take advantage of the security loopholes of the cloud. Large enterprises are expected to increase their security budgets to efficiently address security concerns and instil confidence in cloud computing.

We believe that growing demand for Akamai’s security solutions will translate into significant growth opportunities going ahead. In the last reported quarter, Performance & security solutions sales increased 16% year over year to $327 million. Of it, $87 million was generated from Akamai’s cloud security solutions, which surged 42% year over year.

Acquisitions & Partnerships Key Catalyst

Over the years, acquisitions have been a key catalyst for Akamai. In 2015, the company completed three acquisitions (Xerocole, Codemate A/S and Bloxx) for almost $142.3 million. After a brief lull in the first half of 2016, it recently acquired data processing solution provider Concord Systems. The takeover expands Akamai’s presence in the Internet of Things (IoT) technology market.

Moreover, Akamai’s partnership with the likes of Microsoft (MSFT - Free Report) , Cisco (CSCO - Free Report) , AT&T and IBM, will generate financial synergies over the long term. However, intense competition has kept pricing under pressure, which is a significant headwind.

Zacks Rank & Key Picks

Akamai has a Zacks Rank #4 (Sell). Yirendai Ltd. (YRD - Free Report) is better-ranked stock with a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  Yirendai’s current-year estimates have increased 44 cents to $1.75 over the last 60 days.

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