x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2011 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Delaware | 04-3432319 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company) |
Page | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 6. | ||
Item 1. | Financial Statements |
June 30, 2011 | December 31, 2010 | ||||||
(In thousands, except share data) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 205,629 | $ | 231,866 | |||
Marketable securities (including restricted securities of $51 and $272 at June 30, 2011 and December 31, 2010, respectively) | 291,647 | 375,005 | |||||
Accounts receivable, net of reserves of $4,914 and $5,232 at June 30, 2011 and December 31, 2010, respectively | 178,260 | 175,366 | |||||
Prepaid expenses and other current assets | 47,348 | 48,029 | |||||
Deferred income tax assets | 28,069 | 28,201 | |||||
Total current assets | 750,953 | 858,467 | |||||
Property and equipment, net | 274,377 | 255,929 | |||||
Marketable securities (including restricted securities of $45 at June 30, 2011 and December 31, 2010) | 788,197 | 636,531 | |||||
Goodwill | 452,914 | 452,914 | |||||
Other intangible assets, net | 53,887 | 62,456 | |||||
Deferred income tax assets | 74,281 | 75,226 | |||||
Other assets | 9,540 | 11,153 | |||||
Total assets | $ | 2,404,149 | $ | 2,352,676 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 29,053 | $ | 26,375 | |||
Accrued expenses and other current liabilities | 86,909 | 94,661 | |||||
Deferred revenue | 22,412 | 23,808 | |||||
Accrued restructuring | 334 | 307 | |||||
Total current liabilities | 138,708 | 145,151 | |||||
Other liabilities | 33,693 | 26,278 | |||||
Deferred revenue | 3,433 | 3,642 | |||||
Total liabilities | 175,834 | 175,071 | |||||
Commitments, contingencies and guarantees (Note 15) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.01 par value; 5,000,000 shares authorized; 700,000 shares designated as Series A Junior Participating Preferred Stock; no shares issued or outstanding | — | — | |||||
Common stock, $0.01 par value; 700,000,000 shares authorized; 194,324,558 shares issued and 185,981,780 shares outstanding at June 30, 2011 and 192,383,121 shares issued and 186,603,380 outstanding at December 31, 2010 | 1,944 | 1,924 | |||||
Additional paid-in capital | 5,009,667 | 4,970,278 | |||||
Accumulated other comprehensive income (loss) | 298 | (5,741 | ) | ||||
Treasury stock, at cost, 8,342,778 shares at June 30, 2011 and 5,779,741 shares at December 31, 2010 | (251,537 | ) | (158,261 | ) | |||
Accumulated deficit | (2,532,057 | ) | (2,630,595 | ) | |||
Total stockholders’ equity | 2,228,315 | 2,177,605 | |||||
Total liabilities and stockholders’ equity | $ | 2,404,149 | $ | 2,352,676 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
(In thousands, except per share data) | |||||||||||||||
Revenues | $ | 276,989 | $ | 245,318 | $ | 552,942 | $ | 485,347 | |||||||
Costs and operating expenses: | |||||||||||||||
Cost of revenues | 89,647 | 71,840 | 178,715 | 139,314 | |||||||||||
Research and development | 11,006 | 13,577 | 23,600 | 26,756 | |||||||||||
Sales and marketing | 52,837 | 55,203 | 106,202 | 104,871 | |||||||||||
General and administrative | 45,975 | 43,707 | 89,876 | 83,257 | |||||||||||
Amortization of other intangible assets | 4,292 | 4,152 | 8,569 | 8,260 | |||||||||||
Total costs and operating expenses | 203,757 | 188,479 | 406,962 | 362,458 | |||||||||||
Income from operations | 73,232 | 56,839 | 145,980 | 122,889 | |||||||||||
Interest income | 3,021 | 3,262 | 5,972 | 6,512 | |||||||||||
Interest expense | — | (618 | ) | — | (1,327 | ) | |||||||||
Other (expense) income, net | (107 | ) | 122 | (1,142 | ) | 47 | |||||||||
Gain on investments, net | 75 | 127 | 84 | 248 | |||||||||||
Loss on early extinguishment of debt | — | (294 | ) | — | (294 | ) | |||||||||
Income before provision for income taxes | 76,221 | 59,438 | 150,894 | 128,075 | |||||||||||
Provision for income taxes | 28,300 | 21,315 | 52,356 | 49,074 | |||||||||||
Net income | $ | 47,921 | $ | 38,123 | $ | 98,538 | $ | 79,001 | |||||||
Net income per weighted average share: | |||||||||||||||
Basic | $ | 0.26 | $ | 0.22 | $ | 0.53 | $ | 0.46 | |||||||
Diluted | $ | 0.25 | $ | 0.20 | $ | 0.52 | $ | 0.42 | |||||||
Shares used in per share calculations: | |||||||||||||||
Basic | 186,612 | 173,317 | 186,731 | 172,209 | |||||||||||
Diluted | 190,179 | 190,479 | 190,781 | 189,746 |
For the Six Months Ended June 30, | |||||||
2011 | 2010 | ||||||
(In thousands) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 98,538 | $ | 79,001 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 82,467 | 67,634 | |||||
Stock-based compensation expense | 27,324 | 39,384 | |||||
Provision for deferred income taxes, net | — | 44,611 | |||||
Amortization of deferred financing costs | — | 394 | |||||
Provision for doubtful accounts | 454 | 1,445 | |||||
Excess tax benefits from stock-based compensation | (10,850 | ) | (12,923 | ) | |||
Loss on investments and disposal of property and equipment, net | 4 | (245 | ) | ||||
Non-cash portion of loss on early extinguishment of debt | — | 294 | |||||
Changes in operating assets and liabilities, net of effects of acquisitions: | |||||||
Accounts receivable | 456 | (16,406 | ) | ||||
Prepaid expenses and other current assets | 841 | (40,284 | ) | ||||
Accounts payable, accrued expenses and other current liabilities | (5,713 | ) | 11,878 | ||||
Deferred revenue | (2,182 | ) | (1,319 | ) | |||
Accrued restructuring | (32 | ) | (93 | ) | |||
Other non-current assets and liabilities | 9,052 | 762 | |||||
Net cash provided by operating activities | 200,359 | 174,133 | |||||
Cash flows from investing activities: | |||||||
Cash paid for acquisition of business, net of cash acquired | (550 | ) | (12,010 | ) | |||
Purchases of property and equipment | (68,525 | ) | (86,446 | ) | |||
Capitalization of internal-use software costs | (20,450 | ) | (14,841 | ) | |||
Purchases of short- and long-term marketable securities | (578,135 | ) | (614,679 | ) | |||
Proceeds from sales of short- and long-term marketable securities | 272,709 | 274,620 | |||||
Proceeds from maturities of short- and long-term marketable securities | 238,428 | 230,102 | |||||
Increase in other investments | — | (500 | ) | ||||
Proceeds from the sale of property and equipment | 88 | 38 | |||||
Decrease in restricted investments held for security deposits | 221 | 8 | |||||
Net cash used in investing activities | (156,214 | ) | (223,708 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from the issuance of common stock under stock option and employee stock purchase plans | 12,122 | 20,993 | |||||
Excess tax benefits from stock-based compensation | 10,850 | 12,923 | |||||
Employee taxes paid related to net share settlement of equity awards | (3,507 | ) | — | ||||
Repurchases of common stock | (92,613 | ) | (42,621 | ) | |||
Net cash used in financing activities | (73,148 | ) | (8,705 | ) | |||
Effects of exchange rate changes on cash and cash equivalents | 2,766 | (2,519 | ) | ||||
Net decrease in cash and cash equivalents | (26,237 | ) | (60,799 | ) | |||
Cash and cash equivalents at beginning of period | 231,866 | 181,305 | |||||
Cash and cash equivalents at end of period | $ | 205,629 | $ | 120,506 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for income taxes | $ | 17,898 | $ | 22,130 | |||
Cash paid for interest | — | 966 | |||||
Non-cash financing and investing activities: | |||||||
Capitalization of stock-based compensation, net of impairments | $ | 3,465 | $ | 3,679 | |||
Common stock issued upon conversion of 1% convertible senior notes | — | 136,193 | |||||
Common stock returned upon settlement of escrow claims related to prior business acquisitions | — | (125 | ) |
Gross Unrealized | Classification on Balance Sheet | ||||||||||||||||||||||
As of June 30, 2011 | Cost | Gains | Losses | Aggregate Fair Value | Short-term Marketable Securities | Long-term Marketable Securities | |||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||
Certificates of deposit | $ | 96 | $ | — | $ | — | $ | 96 | $ | 51 | $ | 45 | |||||||||||
Commercial paper | 9,998 | 1 | — | 9,999 | 9,999 | — | |||||||||||||||||
U.S. corporate debt securities | 741,009 | 2,270 | (273 | ) | 743,006 | 270,470 | 472,536 | ||||||||||||||||
U.S. government agency obligations | 202,563 | 211 | (135 | ) | 202,639 | 11,127 | 191,512 | ||||||||||||||||
Auction rate securities | 136,350 | — | (12,246 | ) | 124,104 | — | 124,104 | ||||||||||||||||
$ | 1,090,016 | $ | 2,482 | $ | (12,654 | ) | $ | 1,079,844 | $ | 291,647 | $ | 788,197 | |||||||||||
Gross Unrealized | Classification on Balance Sheet | ||||||||||||||||||||||
As of December 31, 2010 | Cost | Gains | Losses | Aggregate Fair Value | Short-term Marketable Securities | Long-term Marketable Securities | |||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||||||
Certificates of deposit | $ | 96 | $ | — | $ | — | $ | 96 | $ | 51 | $ | 45 | |||||||||||
Commercial paper | 59,912 | 34 | (2 | ) | 59,944 | 59,944 | — | ||||||||||||||||
U.S. corporate debt securities | 651,855 | 1,416 | (736 | ) | 652,535 | 301,625 | 350,910 | ||||||||||||||||
U.S. government agency obligations | 161,722 | 102 | (119 | ) | 161,705 | 13,385 | 148,320 | ||||||||||||||||
Auction rate securities | 150,800 | — | (13,544 | ) | 137,256 | — | 137,256 | ||||||||||||||||
$ | 1,024,385 | $ | 1,552 | $ | (14,401 | ) | $ | 1,011,536 | $ | 375,005 | $ | 636,531 |
Fair Value Measurements at Reporting | |||||||||||||||
Total Fair Value at | Date Using | ||||||||||||||
June 30, 2011 | Level 1 | Level 2 | Level 3 | ||||||||||||
Money market funds | $ | 31,495 | $ | 31,495 | $ | — | $ | — | |||||||
Certificates of deposit | 96 | 96 | — | — | |||||||||||
Commercial paper | 9,999 | — | 9,999 | — | |||||||||||
U.S. corporate debt securities | 743,006 | — | 743,006 | — | |||||||||||
U.S. government agency obligations | 202,639 | — | 202,639 | — | |||||||||||
Auction rate securities | 124,104 | — | — | 124,104 | |||||||||||
$ | 1,111,339 | $ | 31,591 | $ | 955,644 | $ | 124,104 | ||||||||
Fair Value Measurements at Reporting | |||||||||||||||
Total Fair Value at | Date Using | ||||||||||||||
December 31, 2010 | Level 1 | Level 2 | Level 3 | ||||||||||||
Money market funds | $ | 55,648 | $ | 55,648 | $ | — | $ | — | |||||||
Certificates of deposit | 96 | 96 | — | — | |||||||||||
Commercial paper | 59,944 | — | 59,944 | — | |||||||||||
U.S. corporate debt securities | 652,535 | — | 652,535 | — | |||||||||||
U.S. government agency obligations | 161,705 | — | 161,705 | — | |||||||||||
Auction rate securities | 137,256 | — | — | 137,256 | |||||||||||
$ | 1,067,184 | $ | 55,744 | $ | 874,184 | $ | 137,256 |
Auction Rate Securities | |||
Balance as of December 31, 2010 | $ | 137,256 | |
Redemptions of securities | (14,450 | ) | |
Unrealized gain included in accumulated other comprehensive income (loss), net | 1,298 | ||
Balance as of June 30, 2011 | $ | 124,104 |
Auction Rate Securities | Put Option Related to Auction Rate Securities | Total | |||||||||
Balance as of December 31, 2009 | $ | 244,505 | $ | 9,614 | $ | 254,119 | |||||
Redemptions of securities | (78,425 | ) | — | (78,425 | ) | ||||||
Unrealized gain included in accumulated other comprehensive income (loss), net | 5,439 | — | 5,439 | ||||||||
Unrealized gain on auction rate securities included in the statement of operations | 6,182 | — | 6,182 | ||||||||
Unrealized loss on other investment-related assets included in the statement of operations | — | (6,182 | ) | (6,182 | ) | ||||||
Balance as of June 30, 2010 | $ | 177,701 | $ | 3,432 | $ | 181,133 |
June 30, 2011 | December 31, 2010 | ||||||
Available-for-sale securities: | |||||||
Due in 1 year or less | $ | 291,647 | $ | 375,005 | |||
Due after 1 year through 5 years | 664,093 | 499,275 | |||||
Due after 10 years | 124,104 | 137,256 | |||||
$ | 1,079,844 | $ | 1,011,536 |
June 30, 2011 | December 31, 2010 | ||||||
Trade accounts receivable | $ | 124,235 | $ | 116,212 | |||
Unbilled accounts | 58,939 | 64,386 | |||||
Gross accounts receivable | 183,174 | 180,598 | |||||
Allowance for doubtful accounts | (1,382 | ) | (1,329 | ) | |||
Reserve for cash-basis customers | (3,532 | ) | (3,903 | ) | |||
Total accounts receivable reserves | (4,914 | ) | (5,232 | ) | |||
Accounts receivable, net | $ | 178,260 | $ | 175,366 |
June 30, 2011 | December 31, 2010 | ||||||
Payroll and other related benefits | $ | 23,083 | $ | 51,591 | |||
Bandwidth and co-location | 20,299 | 21,787 | |||||
Property, use and other taxes | 36,748 | 15,849 | |||||
Professional service fees | 5,505 | 2,678 | |||||
Contingent consideration | — | 990 | |||||
Other | 1,274 | 1,766 | |||||
Total | $ | 86,909 | $ | 94,661 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 47,921 | $ | 38,123 | $ | 98,538 | $ | 79,001 | |||||||
Add back of interest expense on 1% convertible senior notes (net of tax) | — | 396 | — | 818 | |||||||||||
Numerator for diluted net income per common share | $ | 47,921 | $ | 38,519 | $ | 98,538 | $ | 79,819 | |||||||
Denominator: | |||||||||||||||
Denominator for basic net income per common share | 186,612 | 173,317 | 186,731 | 172,209 | |||||||||||
Effect of dilutive securities: | |||||||||||||||
Stock options | 2,810 | 3,992 | 3,081 | 3,717 | |||||||||||
Effect of escrow contingencies | — | 339 | — | 339 | |||||||||||
RSUs and deferred stock units | 757 | 1,396 | 969 | 1,299 | |||||||||||
Assumed conversion of 1% convertible senior notes | — | 11,435 | — | 12,182 | |||||||||||
Denominator for diluted net income per common share | 190,179 | 190,479 | 190,781 | 189,746 | |||||||||||
Basic net income per common share | $ | 0.26 | $ | 0.22 | $ | 0.53 | $ | 0.46 | |||||||
Diluted net income per common share | $ | 0.25 | $ | 0.20 | $ | 0.52 | $ | 0.42 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Stock-based compensation expense by type of award: | |||||||||||||||
Stock options | $ | 3,420 | $ | 3,628 | $ | 7,206 | $ | 7,397 | |||||||
Deferred stock units | 1,885 | 1,885 | 1,885 | 1,885 | |||||||||||
RSUs | 6,528 | 15,909 | 18,648 | 31,593 | |||||||||||
Shares issued under the Employee Stock Purchase Plan | 1,420 | 1,056 | 3,050 | 2,188 | |||||||||||
Amounts capitalized as internal-use software | (1,641 | ) | (2,202 | ) | (3,465 | ) | (3,679 | ) | |||||||
Total stock-based compensation before income taxes | 11,612 | 20,276 | 27,324 | 39,384 | |||||||||||
Less: Income tax benefit | (4,311 | ) | (7,271 | ) | (9,373 | ) | (14,999 | ) | |||||||
Total stock-based compensation, net of taxes | $ | 7,301 | $ | 13,005 | $ | 17,951 | $ | 24,385 | |||||||
Effect of stock-based compensation on income by line item: | |||||||||||||||
Cost of revenues | $ | 590 | $ | 707 | $ | 1,145 | $ | 1,408 | |||||||
Research and development expense | 2,124 | 3,542 | 4,886 | 7,535 | |||||||||||
Sales and marketing expense | 5,315 | 8,776 | 12,161 | 17,800 | |||||||||||
General and administrative expense | 3,583 | 7,251 | 9,132 | 12,641 | |||||||||||
Provision for income taxes | (4,311 | ) | (7,271 | ) | (9,373 | ) | (14,999 | ) | |||||||
Total cost related to stock-based compensation, net of taxes | $ | 7,301 | $ | 13,005 | $ | 17,951 | $ | 24,385 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Net income | $ | 47,921 | $ | 38,123 | $ | 98,538 | $ | 79,001 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustments | 1,782 | (3,094 | ) | 4,388 | (4,880 | ) | |||||||||
Change in unrealized gain (loss) on investments, net | 1,580 | 3,980 | 2,677 | 3,989 | |||||||||||
Income tax expense related to unrealized gain (loss) on investments, net | (605 | ) | (1,542 | ) | (1,025 | ) | (1,545 | ) | |||||||
Other comprehensive income (loss) | 2,757 | (656 | ) | 6,040 | (2,436 | ) | |||||||||
Comprehensive income | $ | 50,678 | $ | 37,467 | $ | 104,578 | $ | 76,565 |
June 30, 2011 | December 31, 2010 | ||||||
Foreign currency translation adjustment | $ | 6,491 | $ | 2,103 | |||
Net unrealized gain (loss) on investments, net of tax of $3,979 at June 30, 2011 and $5,005 at December 31, 2010 | (6,193 | ) | (7,844 | ) | |||
Total accumulated other comprehensive income (loss) | $ | 298 | $ | (5,741 | ) |
June 30, 2011 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
Completed technology | $ | 36,731 | $ | (19,599 | ) | $ | 17,132 | ||||
Customer relationships | 88,700 | (55,660 | ) | 33,040 | |||||||
Non-compete agreements | 8,340 | (4,670 | ) | 3,670 | |||||||
Trademarks and trade names | 800 | (755 | ) | 45 | |||||||
Acquired license rights | 490 | (490 | ) | — | |||||||
Total | $ | 135,061 | $ | (81,174 | ) | $ | 53,887 |
December 31, 2010 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
Completed technology | $ | 36,731 | $ | (16,520 | ) | $ | 20,211 | ||||
Customer relationships | 88,700 | (50,832 | ) | 37,868 | |||||||
Non-compete agreements | 8,340 | (4,070 | ) | 4,270 | |||||||
Trademarks and trade names | 800 | (693 | ) | 107 | |||||||
Acquired license rights | 490 | (490 | ) | — | |||||||
Total | $ | 135,061 | $ | (72,605 | ) | $ | 62,456 |
Operating Leases | |||
Remaining 2011 | $ | 12,239 | |
2012 | 23,177 | ||
2013 | 21,418 | ||
2014 | 20,356 | ||
2015 | 19,632 | ||
Thereafter | 56,419 | ||
Total | $ | 153,241 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||
Revenues | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
Cost of revenues | 32.4 | 29.3 | 32.3 | 28.7 | |||||||
Research and development expense | 4.0 | 5.5 | 4.3 | 5.5 | |||||||
Sales and marketing expense | 19.1 | 22.5 | 19.2 | 21.6 | |||||||
General and administrative expense | 16.6 | 17.8 | 16.3 | 17.2 | |||||||
Amortization of other intangible assets | 1.5 | 1.7 | 1.5 | 1.7 | |||||||
Total cost and operating expenses | 73.6 | 76.8 | 73.6 | 74.7 | |||||||
Income from operations | 26.4 | 23.2 | 26.4 | 25.3 | |||||||
Interest income | 1.1 | 1.3 | 1.1 | 1.3 | |||||||
Interest expense | — | (0.3 | ) | — | (0.2 | ) | |||||
Other (expense) income, net | — | — | (0.2 | ) | — | ||||||
Gain on investments, net | — | 0.1 | — | 0.1 | |||||||
Loss on early extinguishment of debt | — | (0.1 | ) | — | (0.1 | ) | |||||
Income before provision for income taxes | 27.5 | 24.2 | 27.3 | 26.4 | |||||||
Provision for income taxes | 10.2 | 8.7 | 9.5 | 10.1 | |||||||
Net income | 17.3 | % | 15.5 | % | 17.8 | % | 16.3 | % |
• | During each of the first two quarters of 2011, we were able to offset lost committed recurring revenue due to customer cancellations, terminations or price reductions by adding new customers and increasing the number of services, features |
• | During each of the first two quarters of 2011, unit prices offered to some new and existing customers declined, primarily as a result of competition from new and established competitors. These price reductions primarily impacted customers for which we deliver high volumes of traffic over our network, such as digital media customers. If we continue to experience decreases in unit prices for new and existing customers and we are unable to offset such reductions with increased traffic over our network or increased sales of value-added services to customers, our revenues and profit margins could decrease. |
• | Historically, we have experienced seasonal variations in our quarterly revenues attributable to e-commerce services used by our retail customers, with higher revenues in the fourth quarter of the year and lower revenues during the summer months. If this trend continues, our ability to generate quarterly revenue growth on a sequential basis could be impacted. |
• | In the first two quarters of 2011, we experienced a moderation in the rate of traffic growth in our volume-driven solutions as compared to the second half of 2010. If this trend continues, our ability to generate revenue growth could be impacted. |
• | During the first two quarters of 2011, we reduced our network bandwidth costs per unit by entering into new supplier contracts with lower pricing and amending existing contracts to take advantage of price reductions offered by our existing suppliers. Additionally, we continued to invest in internal-use software development to improve the performance and efficiency of our network. Due to the increased traffic delivered over our network, our total bandwidth costs increased during the first two quarters of 2011 as compared to the same periods in 2010. We believe that our overall bandwidth costs will continue to increase as a result of expected higher traffic levels, partially offset by anticipated continued reductions in bandwidth costs per unit. If we do not experience lower per unit bandwidth pricing or we are unsuccessful at effectively routing traffic over our network through lower cost providers, total network bandwidth costs could increase more than expected during the remainder of 2011. |
• | In recent quarters, we have seen co-location costs increase and become a higher percentage of total cost of revenues due to the expansion of our network. Continuation of this trend may negatively impact our profitability. |
• | During each of the first two quarters of 2011, revenues derived from customers outside the United States accounted for 30% of our total revenues. For the remainder 2011, we anticipate revenues from such customers as a percentage of our total revenues to be consistent with each of the first two quarters. |
• | Depreciation and amortization expense related to our network equipment and internal-use software development costs increased during each of the first two quarters of 2011 as compared to the same quarters in 2010. Due to expected future purchases of network equipment during 2011, we believe that depreciation expense, as well as co-location costs, related to our network equipment will continue to increase in 2011. We expect to continue to enhance and add functionality to our service offerings and capitalize stock-based compensation expense attributable to employees working on such projects, which would increase the amount of capitalized internal-use software costs. As a result, we believe that the amortization of internal-use software development costs, which we include in cost of revenues, will be higher in 2011 as compared to 2010. All of these increased costs could negatively affect our profitability. |
• | For the three and six months ended June 30, 2011, our stock-based compensation expense was $11.6 million and $27.3 million, respectively, as compared to $20.3 million and $39.4 million, respectively, for the three and six months ended June 30, 2010. The decrease in stock-based compensation expense for the three and six months ended June 30, 2011 as compared to the same periods in 2010 was primarily due to management's assessment, as of June 30, 2011, that certain outstanding restricted stock units, or RSUs, with performance-based vesting conditions will not vest because the associated performance targets are unlikely to be met. We expect that stock-based compensation expense for 2011 will decrease as compared to 2010, related to this change in management's assessment of the expected vesting of the RSUs granted in prior periods. As of June 30, 2011, our total pre-tax unrecognized compensation costs for stock-based awards were $108.0 million, which we expect to recognize as expense over a weighted average period of 1.3 years through 2015. |
• | As of June 30, 2011, we held $136.4 million in par value of auction rate securities, which we refer to as ARS. Based upon our cash, cash equivalents and marketable securities balance of $1.3 billion at June 30, 2011 and expected operating cash flows, we do not anticipate that the lack of liquidity associated with our ARS will adversely affect our ability to conduct business during the remainder of 2011. We believe we have the ability to hold these ARS until a recovery of the auction process, a buyer is found outside the auction process, the securities are called or refinanced by the issuer, or until maturity. |
• | During the six months ended June 30, 2011, our effective income tax rate was 34.7%. We expect our annual effective income tax rate in 2011 to remain relatively consistent in the remaining quarters of 2011; this expectation does not take into consideration the effect of discrete items such as those relating to stock-based compensation. In 2010, due to our continued utilization of available net operating losses, or NOLs, and tax credit carryforwards, our tax payments were significantly lower than our recorded income tax provision. We expect to utilize substantially all of our tax credit |
• | increase our revenue by adding customers through long-term contracts and limiting customer cancellations and terminations; |
• | offset unit price declines for our services with higher volumes of traffic delivered on our network as well as increased sales of our value-added solutions; |
• | prevent disruptions to our services and network due to accidents or intentional attacks; and |
• | maintain our network bandwidth and co-location costs and other operating expenses consistent with our revenues. |
For the Three Months Ended June 30, 2011 as compared to 2010 | For the Six Months Ended June 30, 2011 as compared to 2010 | ||||||
Media & Entertainment | $ | 11.2 | $ | 26.3 | |||
Commerce | 10.1 | 21.9 | |||||
Enterprise | 8.2 | 16.8 | |||||
High Tech | 0.6 | (1.0 | ) | ||||
Public Sector | 1.6 | 3.6 | |||||
Total net increase | $ | 31.7 | $ | 67.6 |
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
Bandwidth and service-related fees | $ | 19.7 | $ | 18.6 | $ | 41.7 | $ | 37.1 | |||||||
Co-location fees | 32.6 | 22.7 | 62.6 | 43.0 | |||||||||||
Payroll and related costs of network operations personnel | 3.6 | 3.3 | 7.4 | 6.4 | |||||||||||
Stock-based compensation, including amortization of prior capitalized amounts | 2.5 | 2.5 | 5.1 | 5.1 | |||||||||||
Depreciation and impairment of network equipment | 23.5 | 18.3 | 46.4 | 34.9 | |||||||||||
Amortization of internal-use software | 7.7 | 6.4 | 15.5 | 12.8 | |||||||||||
Total cost of revenues | $ | 89.6 | $ | 71.8 | $ | 178.7 | $ | 139.3 |
• | increases in co-location costs as we deployed more servers worldwide; |
• | an increase in depreciation expense of network equipment and amortization of internal-use software as we continued to invest in our infrastructure; and |
• | an increase in amounts paid to network providers for bandwidth due to higher traffic levels, partially offset by reduced bandwidth costs per unit. |
For the Three Months Ended June 30, 2011 as compared to 2010 | For the Six Months Ended June 30, 2011 as compared to 2010 | ||||||
Payroll and related costs | $ | 1.5 | $ | 5.4 | |||
Stock-based compensation | (1.4 | ) | (2.6 | ) | |||
Capitalized salaries and other expenses | (2.7 | ) | (6.0 | ) | |||
Total net decrease | $ | (2.6 | ) | $ | (3.2 | ) |
For the Three Months Ended June 30, 2011 as compared to 2010 | For the Six Months Ended June 30, 2011 as compared to 2010 | ||||||
Payroll and related costs | $ | 2.1 | $ | 8.8 | |||
Stock-based compensation | (3.5 | ) | (5.6 | ) | |||
Marketing and related costs | (0.5 | ) | (0.9 | ) | |||
Other expenses | (0.5 | ) | (1.0 | ) | |||
Total net (decrease) increase | $ | (2.4 | ) | $ | 1.3 |
• | payroll, stock-based compensation expense and other related costs, including expenses for executive, finance, business applications, network management, human resources and other administrative personnel; |
• | depreciation and amortization of property and equipment we use internally; |
• | fees for professional services; |
• | rent and other facility-related expenditures for leased properties; |
• | provision for doubtful accounts; |
• | insurance costs; and |
• | non-income related taxes. |
For the Three Months Ended June 30, 2011 as compared to 2010 | For the Six Months Ended June 30, 2011 as compared to 2010 | ||||||
Payroll and related costs | $ | 0.6 | $ | 3.9 | |||
Stock-based compensation | (3.7 | ) | (3.5 | ) | |||
Depreciation and amortization | (0.1 | ) | 0.1 | ||||
Facilities-related costs | 1.5 | 3.1 | |||||
Provision for doubtful accounts | 0.7 | 0.7 | |||||
Legal fees | 2.7 | 1.8 | |||||
Non-income taxes | 0.2 | (0.7 | ) | ||||
Consulting and advisory services | (0.2 | ) | (0.8 | ) | |||
Other expenses | 0.6 | 2.0 | |||||
Total net increase | $ | 2.3 | $ | 6.6 |
Unaudited | |||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
(in thousands, except per share data) | |||||||||||||||
Net income | $ | 47,921 | $ | 38,123 | $ | 98,538 | $ | 79,001 | |||||||
Amortization of other intangible assets | 4,292 | 4,152 | 8,569 | 8,260 | |||||||||||
Stock-based compensation | 11,612 | 20,276 | 27,324 | 39,384 | |||||||||||
Amortization of capitalized stock-based compensation | 1,938 | 1,830 | 4,003 | 3,705 | |||||||||||
Loss on early extinguishment of debt | — | 294 | — | 294 | |||||||||||
Acquisition-related costs (benefits) | — | 345 | (440 | ) | 345 | ||||||||||
Total normalized net income | $ | 65,763 | $ | 65,020 | $ | 137,994 | $ | 130,989 | |||||||
Normalized net income per diluted share | $ | 0.35 | $ | 0.34 | $ | 0.72 | $ | 0.69 | |||||||
Shares used in per share calculations | 190,179 | 190,479 | 190,781 | 189,746 |
Unaudited | |||||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||
(in thousands) | |||||||||||||||
Net income | $ | 47,921 | $ | 38,123 | $ | 98,538 | $ | 79,001 | |||||||
Amortization of other intangible assets | 4,292 | 4,152 | 8,569 | 8,260 | |||||||||||
Stock-based compensation | 11,612 | 20,276 | 27,324 | 39,384 | |||||||||||
Amortization of capitalized stock-based compensation | 1,938 | 1,830 | 4,003 | 3,705 | |||||||||||
Loss on early extinguishment of debt | — | 294 | — | 294 | |||||||||||
Acquisition-related costs (benefits) | — | 345 | (440 | ) | 345 | ||||||||||
Interest income, net | (3,096 | ) | (2,771 | ) | (6,056 | ) | (5,433 | ) | |||||||
Provision for income taxes | 28,300 | 21,315 | 52,356 | 49,074 | |||||||||||
Depreciation and amortization | 35,103 | 28,692 | 69,895 | 55,669 | |||||||||||
Other loss (income), net | 107 | (122 | ) | 1,142 | (47 | ) | |||||||||
Adjusted EBITDA | $ | 126,177 | $ | 112,134 | $ | 255,331 | $ | 230,252 |
For the Six Months Ended June 30, | |||||||
2011 | 2010 | ||||||
Cash, cash equivalents and marketable securities balance as of December 31, 2010 and 2009, respectively | $ | 1,243.4 | $ | 1,061.5 | |||
Changes in cash, cash equivalents and marketable securities: | |||||||
Receipts from customers | 570.1 | 486.7 | |||||
Payments to vendors | (302.3 | ) | (287.1 | ) | |||
Payments for employee payroll | (160.7 | ) | (126.3 | ) | |||
Debt interest and premium payments | — | (1.0 | ) | ||||
Stock option exercises and employee stock purchase plan issuances | 12.1 | 21.0 | |||||
Cash used in business acquisition | (0.6 | ) | (12.0 | ) | |||
Employee taxes paid related to net share settlement of equity awards | (3.5 | ) | — | ||||
Common stock repurchases | (92.6 | ) | (42.6 | ) | |||
Realized and unrealized gains on marketable investments and other investment-related assets, net | 2.8 | 4.2 | |||||
Interest income | 6.0 | 6.5 | |||||
Other | 10.8 | 1.4 | |||||
Net increase | 42.1 | 50.8 | |||||
Cash, cash equivalents and marketable securities balance as of June 30, 2011 and 2010, respectively | $ | 1,285.5 | $ | 1,112.3 |
Payments Due by Period | |||||||||||||||||||
Contractual Obligations as of June 30, 2011 | Total | Less than 12 Months | 12-36 Months | 36-60 Months | More than 60 Months | ||||||||||||||
Bandwidth and co-location agreements | $ | 82.8 | $ | 73.4 | $ | 9.4 | $ | — | $ | — | |||||||||
Real estate operating leases | 153.2 | 24.3 | 63.1 | 31.2 | 34.6 | ||||||||||||||
Open vendor purchase orders | 80.4 | 80.4 | — | — | — | ||||||||||||||
Total | $ | 316.4 | $ | 178.1 | $ | 72.5 | $ | 31.2 | $ | 34.6 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
• | market pressure to decrease our prices; |
• | significant increases in co-location and bandwidth costs or other operating expenses; |
• | failure to increase sales of our core services; |
• | increased competition; |
• | any failure of our current and planned services and software to operate as expected; |
• | loss of any significant customers or loss of existing customers at a rate greater than we increase our number of, and sales to, new customers or our sales to existing customers; |
• | unauthorized use of or access to content delivered over our network or network failures; |
• | the exhaustion of the supply of IPv4 addresses and the inability of Akamai or other Internet users to transition successfully or in a timely manner to IPv6; |
• | failure of a significant number of customers to pay our fees on a timely basis or at all or failure to continue to purchase our services in accordance with their contractual commitments; and |
• | inability to attract high-quality customers to purchase and implement our current and planned services. |
• | quarterly variations in operating results and announcements of innovations; |
• | introduction of new products, services and strategic developments by us or our competitors; |
• | business combinations and investments by us or our competitors; |
• | variations in our revenue, expenses or profitability; |
• | market speculation about whether we are a takeover target; |
• | changes in financial estimates and recommendations by securities analysts; |
• | failure to meet the expectations of public market analysts; |
• | disruptions to our services or unauthorized access to our information technology systems; |
• | unfavorable media coverage; |
• | macro-economic factors; |
• | repurchases of shares of our common stock; |
• | our customers’ inability to access equity and credit markets; |
• | performance by other companies in our industry; and |
• | geopolitical conditions such as acts of terrorism or military conflicts. |
• | cease selling, incorporating or using products or services that incorporate the challenged intellectual property; |
• | pay substantial damages and incur significant litigation expenses; |
• | obtain a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; or |
• | redesign products or services. |
• | increased expenses associated with marketing services in foreign countries; |
• | currency exchange rate fluctuations and limitations on the repatriation and investment of funds; |
• | unexpected changes in regulatory requirements resulting in unanticipated costs and delays; |
• | applications or interpretations of laws or regulations that would subject us to regulatory supervision, additional liability and associated costs, or require us to exit a country, which could have a negative impact on the quality of our services or our results of operations; |
• | uncertainty regarding liability for content or services; |
• | uncertainty about the attractiveness of our offerings to customers based in regions outside of the United States; |
• | adjusting to different employee/employer relationships and different regulations governing such relationships; |
• | difficulty in staffing, developing and managing foreign operations as a result of distance, language and cultural differences; |
• | increased demands on our internal control processes and other resources; |
• | longer accounts receivable payment cycles and difficulties in collecting accounts receivable; |
• | longer sales cycles that may cause operations in foreign countries to be unprofitable for an extended and indefinite period of time; and |
• | potentially adverse tax consequences. |
• | A classified board structure so that only approximately one-third of our board of directors is up for re-election in any one year; |
• | Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; |
• | Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting; such provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company; and |
• | Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period(1) | (a) Total Number of Shares Purchased(2) | (b) Average Price Paid per Share(3) | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(4) | (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under Plans or Programs | ||||||||||
April 1, 2011 – April 30, 2011 | 306,109 | $ | 37.88 | 306,109 | $ | 37,327,869 | (5) | |||||||
May 1, 2011 – May 31, 2011 | 432,977 | $ | 33.87 | 432,977 | $ | 135,336,408 | (6) | |||||||
June 1, 2011 – June 30, 2011 | 794,800 | $ | 30.45 | 794,800 | $ | 111,135,517 | (6) | |||||||
Total | 1,533,886 | 1,533,886 |
(1) | Information is based on settlement dates of repurchase transactions. |
(2) | Consists of shares of our common stock, par value $0.01 per share. All repurchases were made pursuant to a previously-announced program (see note 4 below). All repurchases were made in open market transactions under the terms of a Rule 10b5-1 plan adopted by us. |
(3) | Includes commissions paid. |
(4) | In April 2009, we announced that our Board of Directors had authorized a stock repurchase program for up to $100.0 million of our common stock from time to time on the open market or in privately negotiated transactions. In addition, in April 2010, the Board of Directors approved a $150.0 million one-year extension of the stock repurchase program. In April 2011, we announced that our Board of Directors had approved a one-year stock repurchase program for up to $150.0 million of our common stock under the same terms as earlier programs. On August 8, 2011, the Company's Board of Directors authorized an additional $250.0 million of stock repurchases over the twelve month period that commenced in May 2011. The total authorized funding for stock repurchases in that twelve month period is now $400.0 million. See Note 8 to our unaudited consolidated financial statements included elsewhere in this quarterly report on Form 10-Q. |
(5) | Reflects $250.0 million from the 2009 program and its 2010 extension minus the total aggregate amount purchased in such month and all prior months during which the 2009-2010 repurchase program was in effect and aggregate commissions paid in connection therewith. |
(6) | Reflects $150.0 million from the 2011 program minus the total aggregate amount purchased during such month and all prior months during which the 2011 repurchase program was in effect and aggregate commissions paid in connection therewith. |
Item 6. | Exhibits |
Akamai Technologies, Inc. | ||
August 9, 2011 | By: | /s/ J. DONALD SHERMAN |
J. Donald Sherman | ||
Chief Financial Officer (Duly Authorized Officer, Principal Financial Officer) |
Exhibit 10.48 | Akamai Technologies, Inc. Amended Executive Severance Pay Plan | |
Exhibit 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
Exhibit 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/ Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended | |
Exhibit 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
Exhibit 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document.** | |
101.SCH | XBRL Taxonomy Extension Schema Document.** | |
101.CAL | XBRL Taxonomy Calculation Linkbase Document.** | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.** | |
101.LAB | XBRL Taxonomy Label Linkbase Document.** | |
101.PRE | XBRL Taxonomy Presentation Linkbase Document.** |
** | submitted electronically herewith |
(a) | The appeal must be made in writing: |
1. | I have reviewed this Quarterly Report on Form 10-Q of Akamai Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 9, 2011 | /S/ PAUL SAGAN | |
Paul Sagan, Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Akamai Technologies, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | August 9, 2011 | /s/ J. Donald Sherman | |
J. Donald Sherman, Chief Financial Officer |
Date: | August 9, 2011 | /S/ PAUL SAGAN | |
Paul Sagan, Chief Executive Officer |
Date: | August 9, 2011 | /s/ J. Donald Sherman | |
J. Donald Sherman, Chief Financial Officer |
Commitments, Contingencies and Guarantees (Narrative) (Details) (USD $)
In Millions |
Jun. 30, 2011
|
---|---|
Bandwidth and purchase order commitments | |
Aggregate purchase commitments for current year | $ 80.4 |
Bandwidth Usage And Co Location Services [Member]
|
|
Bandwidth and purchase order commitments | |
2011 | 52.9 |
2012 | 27.6 |
2013 | 2.1 |
2014 | $ 0.2 |
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Statement of Financial Position [Abstract] | ||
Marketable securities, restricted securities | $ 51 | $ 272 |
Accounts receivable, net of reserves | 4,914 | 5,232 |
Marketable securities, restricted securities | $ 45 | $ 45 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock, shares designated as Series A Junior Participating Preferred Stock | 700,000 | 700,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 700,000,000 | 700,000,000 |
Common stock, shares issued | 194,324,558 | 192,383,121 |
Common stock, shares outstanding | 185,981,780 | 186,603,380 |
Treasury stock, shares | 8,342,778 | 5,779,741 |
Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Revenues | $ 276,989 | $ 245,318 | $ 552,942 | $ 485,347 |
Costs and operating expenses: | ||||
Cost of revenues | 89,647 | 71,840 | 178,715 | 139,314 |
Research and development | 11,006 | 13,577 | 23,600 | 26,756 |
Sales and marketing | 52,837 | 55,203 | 106,202 | 104,871 |
General and administrative | 45,975 | 43,707 | 89,876 | 83,257 |
Amortization of other intangible assets | 4,292 | 4,152 | 8,569 | 8,260 |
Total costs and operating expenses | 203,757 | 188,479 | 406,962 | 362,458 |
Income from operations | 73,232 | 56,839 | 145,980 | 122,889 |
Interest income | 3,021 | 3,262 | 5,972 | 6,512 |
Interest expense | 0 | (618) | 0 | (1,327) |
Other (expense) income, net | (107) | 122 | (1,142) | 47 |
Gain on investments, net | 75 | 127 | 84 | 248 |
Loss on early extinguishment of debt | 0 | (294) | 0 | (294) |
Income before provision for income taxes | 76,221 | 59,438 | 150,894 | 128,075 |
Provision for income taxes | 28,300 | 21,315 | 52,356 | 49,074 |
Net income | $ 47,921 | $ 38,123 | $ 98,538 | $ 79,001 |
Net income per weighted average share: | ||||
Basic | $ 0.26 | $ 0.22 | $ 0.53 | $ 0.46 |
Diluted | $ 0.25 | $ 0.20 | $ 0.52 | $ 0.42 |
Shares used in per share calculations: | ||||
Basic | 186,612 | 173,317 | 186,731 | 172,209 |
Diluted | 190,179 | 190,479 | 190,781 | 189,746 |
Accounts Receivable (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable | Net accounts receivable consisted of the following (in thousands):
|
Document and Entity Information
|
6 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 04, 2011
|
|
Document and Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | AKAMAI TECHNOLOGIES INC | |
Entity Central Index Key | 0001086222 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 184,377,298 |
Segment and Geographic Information (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
customers
countries
|
Jun. 30, 2010
customers
countries
|
Jun. 30, 2011
customers
countries
years
|
Jun. 30, 2010
countries
customers
|
Jun. 30, 2011
United States
|
Dec. 31, 2010
United States
|
Jun. 30, 2011
Foreign locations [Member]
|
Dec. 31, 2010
Foreign locations [Member]
|
|
Segment Reporting Information [Line Items] | ||||||||
Property and equipment, net | $ 180.2 | $ 174.9 | $ 94.2 | $ 81.0 | ||||
Percentage of revenue from outside U.S. | 30.00% | 28.00% | 30.00% | 28.00% | ||||
Percentage of revenues related to Europe | 18.00% | 18.00% | 18.00% | 18.00% | ||||
Number of foreign countries greater than 10% revenue | 0 | 0 | 0 | 0 | ||||
Number of customers accounted for 10% or more of total revenues | 0 | 0 | 0 | 0 |
Stockholders' Equity (Tables)
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Jun. 30, 2011
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock-Based Compensation Expense | The following table summarizes the components of total stock-based compensation expense included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (in thousands):
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Concentration of Credit Risk (Details) (USD $)
|
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2011
customers
countries
years
|
Dec. 31, 2010
customers
years
|
|
Estimated aggregate loss related to impairment of auction rate securities included in accumulated other comprehensive income loss | $ 12,200,000 | $ 13,500,000 |
Number of customers related to greater than 10% of accounts receivable | 0 | 1 |
Auction Rate Securities [Member]
|
||
Aggregate Fair value | $ 124,104,000 | $ 137,256,000 |
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Net Income per Share
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Earnings Per Share Reconciliation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income per Share | Net Income per Share Basic net income per share is computed using the weighted average number of common shares outstanding during the applicable period. Diluted net income per share is computed using the weighted average number of common shares outstanding during the period, plus the dilutive effect of potential common stock. Potential common stock consists of shares issuable pursuant to stock options, deferred stock units, restricted stock units (“RSUs”) and convertible notes. The following table sets forth the components used in the computation of basic and diluted net income per common share (in thousands, except per share data):
Outstanding options to acquire an aggregate of 2.5 million and 1.1 million shares of common stock for the three months ended June 30, 2011 and 2010, respectively, were excluded from the calculation of diluted earnings per share because the exercise prices of these stock options were greater than the average market price of the Company’s common stock during the respective periods. As a result, the effect of including these options would be anti-dilutive. Similarly, outstanding options to acquire an aggregate of 2.1 million and 1.6 million shares of common stock for the six months ended June 30, 2011 and 2010, respectively, were excluded from the calculation of diluted earnings per share because the exercise prices of the stock options were greater than the average market price of the Company's common stock during the respective periods. Additionally, 2.9 million and 3.0 million shares of common stock issuable in respect of outstanding performance-based RSUs were excluded from the computation of diluted net income per share for the three and six months ended June 30, 2011, respectively, and 3.2 million and 3.3 million shares of common stock issuable in respect of outstanding performance-based RSUs were excluded from the computation of diluted net income per share for the three and six months ended June 30, 2010, respectively, because the performance conditions had not been met as of those dates. The calculation of assumed proceeds used to determine the diluted weighted average shares outstanding under the treasury stock method in the periods presented was adjusted by tax windfalls and shortfalls associated with all of the Company’s outstanding stock awards. Such windfalls and shortfalls are computed by comparing the tax deductible amount of outstanding stock awards to their grant date fair values and multiplying the results by the applicable statutory tax rate. A positive result creates a windfall, which increases the assumed proceeds, and a negative result creates a shortfall, which reduces the assumed proceeds. |
Comprehensive Income (Tables)
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Jun. 30, 2011
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Comprehensive Income | The following table presents the calculation of comprehensive income and its components (in thousands):
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Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive income (loss) consisted of (in thousands):
|
Comprehensive Income (Schedule of Comprehensive Income) (Details) (USD $)
In Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||
Net income | $ 47,921 | $ 38,123 | $ 98,538 | $ 79,001 |
Foreign currency translation adjustments | 1,782 | (3,094) | 4,388 | (4,880) |
Change in unrealized gain (loss) on investments, net | 1,580 | 3,980 | 2,677 | 3,989 |
Income tax expense related to unrealized gain (loss) on investments, net | (605) | (1,542) | (1,025) | (1,545) |
Other comprehensive income (loss) | 2,757 | (656) | 6,040 | (2,436) |
Comprehensive income | $ 50,678 | $ 37,467 | $ 104,578 | $ 76,565 |
Accrued Expenses and Other Current Liabilities (Schedule of Accrued Expenses and Other Current Liabilities) (Details) (USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Accounts Payable and Accrued Liabilities, Current [Abstract] | ||
Payroll and other related benefits | $ 23,083 | $ 51,591 |
Bandwidth and co-location | 20,299 | 21,787 |
Property, use and other taxes | 36,748 | 15,849 |
Professional service fees | 5,505 | 2,678 |
Contingent consideration | 0 | 990 |
Other | 1,274 | 1,766 |
Total | $ 86,909 | $ 94,661 |
Net Income per Share (Tables)
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Jun. 30, 2011
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Earnings Per Share Reconciliation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components Used in Diluted and Basic Income Per Common Share | The following table sets forth the components used in the computation of basic and diluted net income per common share (in thousands, except per share data):
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Segment and Geographic Information
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
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Segment and Geographic Information [Abstract] | |
Segment and Geographic Information | Segment and Geographic Information Akamai’s chief decision-maker, as defined under the authoritative guidance that discusses disclosures about segments of an enterprise and related information, is the Chief Executive Officer and the executive management team. As of June 30, 2011, Akamai operated in one industry segment: providing services for accelerating and improving the delivery of content and applications over the Internet. The Company is not organized by market and is managed and operated as one business. A single management team that reports to the Chief Executive Officer comprehensively manages the entire business. The Company does not operate any material separate lines of business or separate business entities with respect to its services. Accordingly, the Company does not accumulate discrete financial information with respect to separate product lines and does not have separately reportable segments as defined in the guidance. The Company deploys its servers into networks worldwide. As of June 30, 2011, the Company had $180.2 million and $94.2 million of property and equipment, net of accumulated depreciation, located in the United States and in foreign locations, respectively. As of December 31, 2010, the Company had $174.9 million and $81.0 million of property and equipment, net of accumulated depreciation, located in the United States and in foreign locations, respectively. Akamai sells its services through a direct sales force located both domestically and abroad. For the each of the three and six month periods ended June 30, 2011 and 2010 approximately 30% and 28%, respectively, of the Company’s revenues were derived from operations located outside of the United States, including 18% derived from Europe during each of such periods. No single country outside the United States accounted for 10% or more of revenues during these periods. For each of the three and six month periods ended June 30, 2011 and 2010, no customer accounted for 10% or more of total revenues. |
Business Acquisition
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
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Business Combinations [Abstract] | |
Business Acquisition | Business Acquisition In June 2010, the Company acquired substantially all of the assets and liabilities of Velocitude LLC (“Velocitude”), in exchange for payment of approximately $12.0 million in cash. In addition, the Company recorded a liability of $2.4 million for contingent consideration related to the expected achievement of certain post-closing milestones. During the three months ended June 30, 2011, the Company made a final payment of $0.4 million related to the contingent consideration. The acquisition of substantially all of the assets of Velocitude was intended to further Akamai’s strategic position in the mobile market and was accounted for using the purchase method of accounting. The Company allocated $11.6 million of the cost of the acquisition to goodwill and $2.8 million to other intangible assets. |
Comprehensive Income
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Jun. 30, 2011
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | Comprehensive Income The following table presents the calculation of comprehensive income and its components (in thousands):
Accumulated other comprehensive income (loss) consisted of (in thousands):
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Forward Currency Contracts
|
6 Months Ended |
---|---|
Jun. 30, 2011
|
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Foreign Currency [Abstract] | |
Foreign Currency Disclosure [Text Block] | Forward Currency Contracts Substantially all of the Company's foreign subsidiaries use the local currency of its respective countries as its functional currency. Assets and liabilities are translated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated at the average exchange rates for the reported period. Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity. Gains and losses resulting from foreign currency transactions are recognized as other (expense) income, net within the statement of operations. The Company enters into short-term foreign currency forward contracts to offset the foreign exchange gains and losses generated by the re-measurement of certain assets and liabilities recorded in non-functional currencies. Changes in the fair value of these derivatives, as well as re-measurement gains and losses, are recognized in current earnings in other (expense) income, net. The fair value of the forward currency contracts are included on the balance sheet in prepaid expenses and other current assets. For the three and six months ended June 30, 2011, the underlying net loss was deemed to be immaterial. The Company's foreign currency forward contracts include credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. The Company minimizes counterparty credit (or repayment) risk by entering into transactions only with major financial institutions of investment grade credit rating. |
Goodwill and Other Intangible Assets
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Jun. 30, 2011
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Goodwill and Other Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets The Company recorded goodwill and other intangible assets as a result of business acquisitions that occurred from 2000 through 2010. The Company also acquired license rights from the Massachusetts Institute of Technology in 1999. Other intangible assets that are subject to amortization consist of the following (in thousands):
Aggregate expense related to amortization of other intangible assets for the three months ended June 30, 2011 and 2010 was $4.3 million and $4.2 million, respectively. For the six months ended June 30, 2011 and 2010, aggregate expense related to the amortization of other intangible assets was $8.6 million and $8.3 million, respectively. Based on the Company’s other intangible assets as of June 30, 2011, aggregate expense related to amortization of other intangible assets is expected to be $8.3 million for the remainder of 2011, and $15.9 million, $13.1 million, $7.6 million and $5.1 million for fiscal years 2012, 2013, 2014 and 2015, respectively. |
Marketable Securities and Investments (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2011
customers
countries
years
|
Dec. 31, 2010
customers
years
|
|
Schedule of Available-for-sale Securities [Line Items] | ||
Cash flow analysis weighted average discount rate | 2.97% | 3.21% |
Cash flow analysis expected term (in years) | 5 | 5 |
Estimated aggregate loss related to impairment of auction rate securities included in accumulated other comprehensive income loss | $ 12.2 | $ 13.5 |
Auction rate securities classified as long term marketable securities on balance sheet | 124.1 | 137.3 |
Auction Rate Securities [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Cost of auction rate securities | $ 136.4 |
Stockholders' Equity
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Jun. 30, 2011
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Stock Repurchase Program On April 29, 2009, the Company announced that its Board of Directors had authorized a stock repurchase program permitting purchases of up to $100.0 million of the Company’s common stock from time to time on the open market or in privately negotiated transactions. On April 28, 2010, the Company announced that its Board of Directors had authorized an extension of the stock repurchase program permitting purchases of an additional $150.0 million of the Company’s common stock from time to time over the next twelve months commencing in May 2010 on the open market or in privately negotiated transactions. The unused balance from the May 2010 extension was not carried forward for future purchases. On April 19, 2011, the Company’s Board of Directors authorized a new program authorizing up to an additional $150.0 million of repurchases over the next twelve months commencing in May 2011. On August 8, 2011, the Company's Board of Directors authorized an additional $250.0 million of stock repurchases over the twelve month period that commenced in May 2011. The total authorized funding for stock repurchases in that twelve month period is now $400.0 million. The timing and amount of any shares repurchased will be determined by the Company’s management based on its evaluation of market conditions and other factors. Repurchases may also be made under a Rule 10b5-1 plan, which would permit the Company to repurchase shares when the Company might otherwise be precluded from doing so under insider trading laws. Subject to applicable securities laws, the Company may choose to suspend or discontinue the repurchase program at any time. During the three and six months ended June 30, 2011, the Company repurchased 1.5 million and 2.6 million shares, respectively, of its common stock for $50.5 million and $93.3 million, respectively. During the three and six months ended June 30, 2010, the Company repurchased 0.5 million and 1.4 million shares, respectively, of its common stock for $20.4 million and $42.3 million, respectively. As of June 30, 2011, the Company had $111.1 million remaining available for future purchases of shares under the current repurchase program. Stock-Based Compensation Expense The following table summarizes the components of total stock-based compensation expense included in the Company’s consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (in thousands):
In addition to the amounts of stock-based compensation reported in the table above, the Company’s consolidated statements of operations for the three and six months ended June 30, 2011 also included stock-based compensation reflected as a component of amortization of capitalized internal-use software; such additional stock-based compensation was $1.9 million and $4.0 million, respectively, before tax. The Company's consolidated statements of operations for the three and six months ended June 30, 2010 also included stock-based compensation reflected as a component of amortization of capitalized internal-use software; such additional stock-based compensation was $1.8 million and $3.7 million, respectively, before tax. |
Subsequent Event (Details) (USD $)
In Millions |
1 Months Ended | |||
---|---|---|---|---|
Aug. 31, 2011
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Apr. 30, 2011
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Apr. 30, 2010
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Apr. 30, 2009
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Subsequent Event [Line Items] | ||||
Increase in stock repurchase authorized amount | $ 250.0 | $ 150.0 | $ 150.0 | |
Amount of common stock repurchases authorized | $ 400.0 | $ 100.0 |
Nature of Business and Basis of Presentation
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6 Months Ended |
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Jun. 30, 2011
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Nature of Business and Basis of Presentation [Abstract] | |
Nature of Business and Basis of Presentation | Nature of Business and Basis of Presentation Akamai Technologies, Inc. (“Akamai” or the “Company”) provides services for accelerating and improving the delivery of content and applications over the Internet. Akamai’s globally distributed platform comprises thousands of servers in hundreds of networks in approximately 70 countries. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. Akamai currently operates in one industry segment: providing services for accelerating and improving delivery of content and applications over the Internet. The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. These financial statements include the accounts of Akamai and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in the accompanying financial statements. Certain information and footnote disclosures normally included in the Company’s annual audited consolidated financial statements and accompanying notes have been condensed or omitted in these interim financial statements. Accordingly, the unaudited consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and accompanying notes included in Akamai’s annual report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission on March 1, 2011. The results of operations presented in this quarterly report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited consolidated financial statements include all adjustments and accruals, consisting only of normal recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. |
Marketable Securities and Investments
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Jun. 30, 2011
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities and Investments | Marketable Securities and Investments The Company accounts for financial assets and liabilities in accordance with a fair value measurement accounting standard. The accounting standard provides a framework for measuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs, other than Level 1 prices, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques. The following is a summary of marketable securities held at June 30, 2011 and December 31, 2010 (in thousands):
Unrealized gains and unrealized temporary losses on investments classified as available-for-sale are included within accumulated other comprehensive income (loss). Upon realization, those amounts are reclassified from accumulated other comprehensive income (loss) to gain (loss) on investments, net in the statement of operations. Realized gains and losses and gains and losses on other-than-temporary impairments on investments are reflected in the income statement as gain (loss) on investments, net. As of June 30, 2011, the Company had recorded $136.4 million of auction rate securities ("ARS") at cost with gross unrealized losses that have been in a continuous loss position for more than 12 months. The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets, including investments and cash equivalents, at June 30, 2011 and December 31, 2010 (in thousands):
The following tables reflect the activity for the Company’s major classes of financial assets measured at fair value using Level 3 inputs, consisting solely of ARS, for the six month periods ended June 30, 2011 and 2010 (in thousands):
As of June 30, 2011, the Company had grouped money market funds and certificates of deposit using a Level 1 valuation because market prices for such investments are readily available in active markets. As of June 30, 2011, the Company had grouped commercial paper, U.S. government agency obligations and U.S. corporate debt securities using a Level 2 valuation because quoted prices for identical or similar assets are available in markets that are not active. As of June 30, 2011, the Company’s assets grouped using a Level 3 valuation consisted of ARS. Historically, the carrying value (par value) of the Company’s ARS holdings approximated fair market value due to the resetting of variable interest rates in a “Dutch auction” process. Beginning in mid-February 2008 and continuing throughout the period ended June 30, 2011, however, the auctions for ARS then held by the Company failed. As a result, the interest rates on ARS reset to the maximum rate per the applicable investment offering statements. The Company will not be able to liquidate affected ARS until a future auction on these investments is successful, a buyer is found outside the auction process, the securities are called or refinanced by the issuer, or the securities mature. Due to these liquidity issues, the Company used a discounted cash flow analysis to determine the estimated fair value of these investments. The discounted cash flow analysis considered the timing of expected future successful auctions, the impact of extended periods of maximum interest rates, collateralization of underlying security investments and the creditworthiness of the issuer. The discounted cash flow analysis as of June 30, 2011 assumed a weighted average discount rate of 2.97% and expected term of five years. The discount rate was determined using a proxy based upon the current market rates for recent debt offerings. The expected term was based on management’s estimate of future liquidity. As a result, as of June 30, 2011, the Company has estimated an aggregate loss of $12.2 million, which was related to the impairment of ARS deemed to be temporary and included in accumulated other comprehensive income (loss) within stockholders’ equity. The discounted cash flow analysis performed as of December 31, 2010 for ARS assumed a weighted average discount rate of 3.21% and expected term of five years. As a result, as of that date, the Company estimated an aggregate loss of $13.5 million, which was related to the impairment of ARS deemed to be temporary and included in accumulated other comprehensive income (loss) within stockholders’ equity. The ARS the Company holds are primarily AAA-rated bonds, most of which are collateralized by federally guaranteed student loans as part of the Federal Family Education Loan Program through the U.S. Department of Education. The Company believes the quality of the collateral underlying these securities will enable it to recover the Company’s principal balance. Despite the failed auctions, the Company continues to receive cash flows in the form of specified interest payments from the issuers of ARS. In addition, the Company does not believe it will be required to sell the ARS prior to a recovery of par value and currently intends to hold the investments until such time because it believes it has sufficient cash, cash equivalents and other marketable securities on-hand and from expected operating cash flows to fund its operations. As of June 30, 2011 and December 31, 2010, the Company classified $124.1 million and $137.3 million, respectively, of ARS as long-term marketable securities on its consolidated balance sheet due to management’s estimate of its inability to liquidate these investments within the succeeding twelve months. Contractual maturities of the Company’s marketable securities held at June 30, 2011 and December 31, 2010 were as follows (in thousands):
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Net Income per Share (Schedule of Components Used in Diluted and Basic Income Per Common Share) (Details) (USD $)
In Thousands, except Per Share data |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Numerator [Abstract] | ||||
Net income | $ 47,921 | $ 38,123 | $ 98,538 | $ 79,001 |
Add back of interest expense on 1% convertible senior notes (net of tax) | 0 | 396 | 0 | 818 |
Numerator for diluted net income per common share | $ 47,921 | $ 38,519 | $ 98,538 | $ 79,819 |
Denominator [Abstract] | ||||
Denominator for basic net income per common share | 186,612 | 173,317 | 186,731 | 172,209 |
Effect of dilutive securities: | ||||
Stock options | 2,810 | 3,992 | 3,081 | 3,717 |
Effect of escrow contingencies | 0 | 339 | 0 | 339 |
RSUs and deferred stock units | 757 | 1,396 | 969 | 1,299 |
Assumed conversion of 1% convertible senior notes | 0 | 11,435 | 0 | 12,182 |
Denominator for diluted net income per common share | 190,179 | 190,479 | 190,781 | 189,746 |
Basic net income per common share | $ 0.26 | $ 0.22 | $ 0.53 | $ 0.46 |
Diluted net income per common share | $ 0.25 | $ 0.20 | $ 0.52 | $ 0.42 |
Business Acquisition (Details) (USD $)
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3 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2011
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Dec. 31, 2010
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Jun. 30, 2011
Velocitude [Member]
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Jun. 30, 2010
Velocitude [Member]
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Business Acquisition [Line Items] | ||||
Cost of acquisition of all assets and liabilities | $ 12,000,000 | |||
Liabilities for contingent consideration related to post closing milestones | 0 | 990,000 | 2,400,000 | |
Cash payment for achievement of post closing milestones | 0 | 990,000 | 2,400,000 | |
Final payment related to contingent consideration | 400,000 | |||
Business acquisition purchase price allocation for goodwill | 11,600,000 | |||
Identifiable intangible assets | $ 2,800,000 |
Commitments, Contingencies and Guarantees (Minimum Aggregate Future Obligations Under Non-cancelable Leases) (Details) (USD $)
In Thousands |
Jun. 30, 2011
|
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Commitments Contingencies and Guarantees [Abstract] | |
Remaining 2011 | $ 12,239 |
2012 | 23,177 |
2013 | 21,418 |
2014 | 20,356 |
2015 | 19,632 |
Thereafter | 56,419 |
Total | $ 153,241 |
Accounts Receivable
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Receivable | Accounts Receivable Net accounts receivable consisted of the following (in thousands):
The Company’s accounts receivable balance includes unbilled amounts that represent revenues recorded for customers that are typically billed monthly in arrears. The Company records reserves against its accounts receivable balance. These reserves consist of allowances for doubtful accounts and reserves for cash-basis customers. Increases and decreases in the allowance for doubtful accounts are included as a component of general and administrative expenses. The Company’s reserve for cash-basis customers increases as services are provided to customers where collection is no longer assured. Increases to the reserve for cash-basis customers are recorded as reductions of revenues. The reserve decreases and revenue is recognized when and if cash payments are received. Estimates are used in determining these reserves and are based upon the Company’s review of outstanding balances on a customer-specific, account-by-account basis. The allowance for doubtful accounts is based upon a review of customer receivables from prior sales with collection issues where the Company no longer believes that the customer has the ability to pay for services previously provided. The Company also performs ongoing credit evaluations of its customers. If such an evaluation indicates that payment is no longer reasonably assured for services provided, any future services provided to that customer will result in the creation of a cash-basis reserve until the Company receives consistent payments. The Company does not have any off-balance sheet credit exposure related to its customers. |
Goodwill and Other Intangible Assets (Tables)
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Jun. 30, 2011
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Goodwill and Other Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Intangible Assets | Other intangible assets that are subject to amortization consist of the following (in thousands):
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Stockholders' Equity (Narrative) (Details) (USD $)
Share data in Millions |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|---|
Aug. 31, 2011
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Apr. 30, 2011
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Apr. 30, 2010
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Apr. 30, 2009
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Stockholders' Equity Note [Abstract] | ||||||||
Amount of common stock repurchases authorized | $ 400,000,000 | $ 100,000,000 | ||||||
Increase in stock repurchase authorized amount | 250,000,000 | 150,000,000 | 150,000,000 | |||||
Shares repurchased during period | 1.5 | 0.5 | 2.6 | 1.4 | ||||
Value of shares repurchased during period | 50,500,000 | 20,400,000 | 93,300,000 | 42,300,000 | ||||
Remaining amount available for future purchases of shares under approved repurchase program. | 111,100,000 | |||||||
Additional stock-based compensation | $ 1,900,000 | $ 1,830,000 | $ 4,000,000 | $ 3,700,000 |
Nature of Business and Basis of Presentation (Details)
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Jun. 30, 2011
countries
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Nature of Business and Basis of Presentation [Abstract] | |
Number of countries servers are in | 70 |
Income Taxes
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6 Months Ended |
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Jun. 30, 2011
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Income Taxes [Abstract] | |
Income Taxes | Income Taxes The Company’s effective income tax rate, including discrete items, was 34.7% and 38.3% for the six months ended June 30, 2011 and 2010, respectively. The effective income tax rate is based upon estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods including settlements of tax audits or assessments, the resolution or identification of tax position uncertainties, and acquisitions of other companies. The discrete items also include the tax effect of disqualifying dispositions of incentive stock options and shares purchased under the Company's Employee Stock Purchase Plan. For the six months ended June 30, 2011, the effective income tax rate was lower than the federal statutory tax rate mainly due to the composition of income in foreign jurisdictions that is taxed at lower rates compared to the statutory tax rates in the United States. For the six months ended June 30, 2010, the effective income tax rate was higher than the federal statutory tax rate mainly due to the effects of accounting for stock-based compensation in accordance with the authoritative guidance for share-based payments, and state income tax expense. |
Accrued Expenses and Other Current Liabilities
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Accounts Payable and Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands):
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Subsequent Event
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6 Months Ended |
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Jun. 30, 2011
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Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Subsequent Event On August 8, 2011, the Company's Board of Directors authorized an additional $250.0 million of stock repurchases over the twelve month period that commenced in May 2011. The total authorized funding for stock repurchases in that twelve month period is now $400.0 million. |
Net Income per Share (Narrative) (Details)
In Millions |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Restricted Stock Units (RSUs) [Member]
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Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 2.9 | 3.2 | 3.0 | 3.3 |
Stock Options [Member]
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Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities | 2.5 | 1.1 | 2.1 | 1.6 |
Commitments, Contingencies and Guarantees (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Commitments Contingencies and Guarantees [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Minimum Aggregate Future Obligations Under Non-cancelable Leases | The expected minimum aggregate future obligations under non-cancelable leases as of June 30, 2011 were as follows (in thousands):
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Marketable Securities and Investments (Tables)
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Jun. 30, 2011
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | The following is a summary of marketable securities held at June 30, 2011 and December 31, 2010 (in thousands):
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Schedule of Fair Value Measurement | The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets, including investments and cash equivalents, at June 30, 2011 and December 31, 2010 (in thousands):
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Schedule of Activity of Major Classes of Assets Measured at Fair Value Using Level 3 Inputs | The following tables reflect the activity for the Company’s major classes of financial assets measured at fair value using Level 3 inputs, consisting solely of ARS, for the six month periods ended June 30, 2011 and 2010 (in thousands):
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Schedule of Contractual Maturities of Marketable Securities and Other Investment Related Assets | Contractual maturities of the Company’s marketable securities held at June 30, 2011 and December 31, 2010 were as follows (in thousands):
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Comprehensive Income (Schedule of Accumulated Other Comprehensive Income (Loss)) (Details) (USD $)
In Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2011
|
Dec. 31, 2010
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Foreign currency translation adjustments | $ 6,491 | $ 2,103 |
Net unrealized gain (loss) on investments, net of tax of $3,979 at June 30, 2011 and $5,005 at December 31, 2010 | (6,193) | (7,844) |
Total accumulated other comprehensive income (loss) | 298 | (5,741) |
Accumulated other comprehensive income loss available for sale securities adjustment tax | $ 3,979 | $ 5,005 |
Accrued Expenses and Other Current Liabilities (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Accounts Payable and Accrued Liabilities, Current [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following (in thousands):
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Recent Accounting Pronouncements
|
6 Months Ended |
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Jun. 30, 2011
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New Accounting Pronouncement or Change in Accounting Principle, Retrospective Adjustments [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In December 2010, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update for business combinations specifically related to the disclosure of supplementary pro forma information for business combinations. This guidance specifies that pro forma disclosures should be reported as if the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period, and the pro forma disclosures must include a description of material, nonrecurring pro forma adjustments. This standard was effective for business combinations with an acquisition date of January 1, 2011 or later. The adoption of the guidance did not have an impact on the Company's financial position or results of operations. In May 2011, the FASB issued amended guidance and disclosure requirements for fair value measurements. This guidance provides a consistent definition of fair value and ensures that the fair value measurement and disclosure requirements are similar between U.S. GAAP and international financial reporting standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This standard will be effective for interim and annual periods beginning after December 15, 2011 and will be applied prospectively. The adoption of the guidance is not expected to have a material impact on the Company's consolidated financial statements. In June 2011, the FASB issued amended disclosure requirements for the presentation of comprehensive income. The amended guidance eliminates the option to present components of other comprehensive income (“OCI”) as part of the statement of changes in equity. Under the amended guidance, all changes in OCI are to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive financial statements. The changes will be effective January 1, 2012 and early adoption is permitted. There will be no impact to the Company's consolidated financial results as the amendments relate only to changes in financial statement presentation. |
Concentration of Credit Risk
|
6 Months Ended |
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Jun. 30, 2011
|
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Concentration of Credit Risk [Abstract] | |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist of cash and cash equivalents, marketable securities and accounts receivable. The Company maintains the majority of its cash, cash equivalents and marketable securities balances principally with domestic financial institutions that the Company believes are of high credit standing. At June 30, 2011 and December 31, 2010, the Company held ARS, with an estimated fair value of $124.1 million and $137.3 million, respectively, that have experienced failed auctions preventing the Company from liquidating those investments. Based on its ability to access its cash and short-term investments and its expected cash flows, the Company does not anticipate the current lack of liquidity with respect to these ARS to have a material impact on its financial condition or results of operations during 2011. As of June 30, 2011, the Company had recorded a pre-tax cumulative unrealized loss of $12.2 million related to the temporary impairment of the ARS, which was included in accumulated other comprehensive loss on its consolidated balance sheet. See Note 4. Concentrations of credit risk with respect to accounts receivable are limited to certain customers to which the Company makes substantial sales. The Company’s customer base consists of a large number of geographically dispersed customers diversified across numerous industries. To reduce risk, the Company routinely assesses the financial strength of its customers. Based on such assessments, the Company believes that its accounts receivable credit risk exposure is limited. No customer accounted for more than 10% of the Company's accounts receivable as of June 30, 2011. As of December 31, 2010, one customer had an account receivable balance that represented greater than 10% of the Company's accounts receivable. The Company believes that, at June 30, 2011, concentration of credit risk related to accounts receivable is not significant. |
Commitments, Contingencies and Guarantees
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Commitments Contingencies and Guarantees [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments, Contingencies and Guarantees | Commitments, Contingencies and Guarantees Operating Lease Commitments The Company leases its facilities under non-cancelable operating leases. These operating leases expire at various dates through December 2019 and generally require the payment of real estate taxes, insurance, maintenance and operating costs. The expected minimum aggregate future obligations under non-cancelable leases as of June 30, 2011 were as follows (in thousands):
Purchase Commitments The Company has long-term commitments for bandwidth usage and co-location services with various network and Internet service providers. For the remainder of 2011 and for the years ending December 31, 2012, 2013 and 2014, the minimum commitments pursuant to these contracts in effect as of June 30, 2011, are $52.9 million, $27.6 million, $2.1 million and $0.2 million, respectively. In addition, as of June 30, 2011, the Company had entered into purchase orders with various vendors for aggregate purchase commitments of $80.4 million, which are expected to be paid over the next twelve months. Litigation Between July 2, 2001 and November 7, 2001, purported class action lawsuits seeking monetary damages were filed in the U.S. District Court for the Southern District of New York against the Company as well as against the underwriters of its October 28, 1999 initial public offering of common stock. The complaints were filed allegedly on behalf of persons who purchased the Company’s common stock during different time periods, all beginning on October 28, 1999 and ending on various dates. The complaints are similar and allege violations of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, primarily based on the allegation that the underwriters received undisclosed compensation in connection with the Company’s initial public offering. On April 19, 2002, a single consolidated amended complaint was filed, reiterating in one pleading the allegations contained in the previously filed separate actions. The consolidated amended complaint defines the alleged class period as October 28, 1999 through December 6, 2000. A Special Litigation Committee of the Company’s Board of Directors authorized management to negotiate a settlement of the pending claims substantially consistent with a Memorandum of Understanding that was negotiated among class plaintiffs, all issuer defendants and their insurers. The parties negotiated a settlement that was subject to approval by the District Court. On February 15, 2005, the Court issued an Opinion and Order preliminarily approving the settlement, provided that the defendants and plaintiffs agree to a modification narrowing the scope of the bar order set forth in the original settlement agreement. On June 25, 2007, the District Court signed an order terminating the settlement. On August 25, 2009, the lead plaintiffs filed a motion for final approval of a new proposed settlement (among plaintiffs, the underwriter defendants, the issuer defendants and the insurers for the issuer defendants), plan of distribution of the settlement fund, and certification of the settlement classes. On October 5, 2009, the District Court issued an opinion and order granting the lead plaintiffs’ motion for final approval of the settlement, approval of the plan of distribution of the settlement fund, and certification of the settlement classes. An order and final judgment was entered on November 4, 2009. Notices of appeal of the District Court’s October 5, 2009 opinion and order have been filed in the United States Court of Appeals for the Second Circuit by certain objecting plaintiffs. If the District Court’s order is upheld on appeal, the Company would have no material liability in connection with this litigation, and the litigation would be resolved. The Company has recorded no liability for this matter as of June 30, 2011. In addition, on or about October 3, 2007, a purported Akamai shareholder, Vanessa Simmonds, filed a complaint in the U.S. District Court for the Western District of Washington, against the underwriters involved in its 1999 initial public offering of common stock, alleging violations of Section 16(b) of the Securities Exchange Act of 1934, as amended. The complaint alleges that the combined number of shares of the Company’s common stock beneficially owned by the lead underwriters and certain unnamed officers, directors and principal shareholders exceeded ten percent of its outstanding common stock from the date of the Company’s initial public offering on October 29, 1999, through at least October 28, 2000. The complaint further alleges that those entities and individuals were thus subject to the reporting requirements of Section 16(a) and the short-swing trading prohibition of Section 16(b) and failed to comply with those provisions. The complaint seeks to recover from the lead underwriters any “short-swing profits” obtained by them in violation of Section 16(b). The Company was named as a nominal defendant in the action but has no liability for the asserted claims. None of the Company’s directors or officers serving in such capacities at the time of its initial public offering are currently named as defendants in this action, but there can be no guarantee that the complaint will not be amended or a new complaint or suit filed to name such directors or officers as defendants in this action or another action alleging a violation of the same provisions of the Securities Exchange Act of 1934, as amended. On March 12, 2009, the Court granted a joint motion by the Company and other issuer defendants to dismiss the complaint without prejudice on the grounds that the plaintiff had failed to make an adequate demand on the Company prior to filing her complaint. In its order, the Court stated it would not permit the plaintiff to amend her demand letters while pursuing her claims in the litigation. Because the Court dismissed the case on the grounds that it lacked subject matter jurisdiction, it did not specifically reach the issue of whether the plaintiff’s claims were barred by the applicable statute of limitations. However, the Court also granted a Joint Motion to Dismiss by the underwriter defendants in the action with respect to cases involving non-moving issuers, holding that the cases were barred by the applicable statute of limitations because the issuers’ shareholders had notice of the potential claims more than five years prior to filing suit. Ms. Simmonds appealed. On December 2, 2010, the Ninth Circuit Court of Appeals affirmed the District Court’s decision to dismiss the moving issuers’ cases (including the Company’s) on the grounds that plaintiff’s demand letters were insufficient to put the issuers on notice of the claims asserted against them and further ordered that the dismissals be made with prejudice. The Ninth Circuit, however, reversed and remanded the District Court’s decision on the underwriters’ motion to dismiss as to the claims arising from the non-moving issuers’ IPOs, finding plaintiff’s claims were not time-barred under the applicable statute of limitations. On January 18, 2011, the Ninth Circuit denied various parties’ petitions for rehearing and for rehearing en banc but stayed its rulings to allow for appeals to the United States Supreme Court. On April 5, 2011, Ms. Simmonds filed a Petition for Writ of Certiorari with the U.S. Supreme Court seeking reversal of the Ninth Circuit's decision relating to the adequacy of the pre-suit demand. On April 15, 2011, underwriter defendants filed a Petition for Writ of Certiorari with the U.S. Supreme Court seeking reversal of the Ninth Circuit's decision relating to the statute of limitation issue. On June 27, 2011, the Supreme Court denied Simmonds' petition regarding the demand issue and granted the underwriters' petition relating to the statute of limitations issue. The Company does not expect the results of this action to have a material adverse effect on its business, results of operations or financial condition. The Company has recorded no liability for this matter as of June 30, 2011. The Company is party to various other litigation matters that management considers routine and incidental to its business. Management does not expect the results of any of these routine actions to have a material adverse effect on the Company’s business, results of operations or financial condition. Guarantees The Company has identified guarantees in accordance with the authoritative guidance for guarantor’s accounting and disclosure requirements for guarantees, including indirect guarantees of indebtedness of others, which is an interpretation of previous accounting statements and a rescission of previous guidance. This guidance elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. The guidance also clarifies that at the time an entity issues a guarantee, that entity must recognize an initial liability for the fair value, or market value, of the obligation it assumes under the guarantee and must disclose that information in its interim and annual financial statements. The Company evaluates losses for guarantees under the statement for accounting for contingencies, as interpreted by the guidance for guarantor’s accounting and disclosure requirements for guarantees, including direct guarantees of indebtedness of others. The Company considers such factors as the degree of probability that the Company would be required to satisfy the liability associated with the guarantee and the ability to make a reasonable estimate of the amount of loss. To date, the Company has not encountered material costs as a result of such obligations and has not accrued any liabilities related to such obligations in its financial statements. The fair value of the Company’s outstanding guarantees as of June 30, 2011 was determined to be immaterial. |
Marketable Securities and Investments (Schedule of Contractual Maturities of Marketable Securities and Other Investment Related Assets) (Details) (Money Market Funds [Member], USD $)
In Thousands |
Jun. 30, 2011
|
Dec. 31, 2010
|
---|---|---|
Money Market Funds [Member]
|
||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale securities due in 1 year or less | $ 291,647 | $ 375,005 |
Available-for-sale securities due after 1 year through 5 years | 664,093 | 499,275 |
Available-for-sale securities due after 10 years | 124,104 | 137,256 |
Total Available-for-sale securities | $ 1,079,844 | $ 1,011,536 |
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