Akamai Technologies, Inc. (AKAM - Free Report) recently inked a deal to buy Janrain in an all-cash transaction. The company’s focus on enhancing its security solutions portfolio amid growing data traffic is in sync with the latest agreement. However, the financial terms of the deal have been kept under wraps.
Notably, Janrain has raised a total of $79.8 million in a series of six venture capital fundings, the last dated Dec 16, 2015, per Crunchbase data.
Headquartered in Portland, OR, Janrain’s robust web identity management capabilities and strength in security access controlsare key catalysts. Janrain, founded in 2002, is touted to be the pioneer in providing a cloud-based platform forcustomer identity and access management (CIAM).
Janrain Identity Cloud platform enables enterprises to assess their customers’ demands and preferences. The process is executed in a secure environment by utilizing digital authentication protocols.
Akamai intends to benefit from the integration of Janrain’s Identity Cloud with its Intelligent Edge Platform.The integration will enable Akamai to provide enhanced secure services to its CIAM customers, in turn boosting engagement. The incremental revenues generated as a result, are anticipated to favor top-line growth.
Akamai anticipates concluding the buyout in the first quarter of 2019. The company anticipates the buyout to impact non-GAAP earnings for 2019 by 5-6 cents per share.
Meanwhile, the Zacks Consensus Estimate for earnings in 2019 is pegged at $4.03 per share, representing year-over-year growth of 13.4%.
Notably, Akamai anticipates the deal to be accretive to non-GAAP earnings in 2020. It also expects the buyout to have no impact on the company’s vision to achieve non-GAAP operating margin of 30% in 2020.
Akamai is benefiting from solid demand for Kona Site Defender, Bot Manager and Prolexic Solutions which are driving Cloud Security Solutions revenues. The traction gained by Enterprise Application Access and Enterprise Threat Protector is also a positive.
In fact in the third quarter of 2018, Cloud Security Solutions revenues (which represented 25% of total revenues) came in at $169 million, surging almost 37% year over year (up 39% adjusted for foreign exchange).
Management remains optimistic over the growing influence of its security solutions during the last reported quarter among media customers, in particular.
Notably, Akamai is one of the largest cloud security providers. It exited the last reported quarter at a run-rate of around $700 million for security business.
We believe the Janrain buyout to boost overall top-line growth and enable Akamai to strengthen its competitive position in the CIAM market.
Further, the deal will help Akamai add more “identity aware” technology enabling it to address fraud, data breach incidents and other threats in an improved manner.
The enhanced performance of Akamai Bot Manager and improved threat intelligence capabilities is expected to be a tailwind.
Notably, Akamai exited third quarter fiscal 2018 ended Sep 30, 2018 with cash and cash equivalents (and marketable securities) of $1.80 billion as compared with $1.86 billion recorded at the end of the previous quarter. Akamai’s strength in cash balance enables it to pursue growth strategies, including acquisitions like Janrain.
Zacks Rank & Key Picks
Akamai carries a Zacks Rank #3 (Hold).
MeetMe, Inc. (MEET - Free Report) , Veeva Systems Inc. (VEEV - Free Report) and SS&C Technologies Holdings, Inc. (SSNC - Free Report) are a few stocks worth considering in the broader technology sector. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for MeetMe, Veeva Systems and SS&C are currently pegged at 20%, 19.5% and 13.5%, respectively.
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