Nature of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Basis of Presentation

Nature of Business and Basis of Presentation

Akamai Technologies, Inc. (the “Company”) provides cloud services for delivering, optimizing and securing online content and business applications. Akamai’s globally-distributed platform comprises more than 141,000 servers in approximately 1,200 networks in 90 countries. The Company was incorporated in Delaware in 1998 and is headquartered in Cambridge, Massachusetts. Akamai currently operates in one industry segment: providing cloud services for delivering, optimizing and securing online content and business applications.

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 the Company 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 the Company’s annual report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange Commission on March 1, 2013.

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, consisting only of normal recurring adjustments, that are necessary for a fair statement of the results of all interim periods reported herein.

Revision of Prior Period Amounts

In the first quarter of 2013, the Company conducted a reevaluation of its business model. Following the review, the Company determined it was appropriate to change the classification of cost of services and support and cost of network build-out and support from sales and marketing and general and administrative expenses, respectively, to costs of revenue because such costs directly support the Company's revenue. The Company has concluded that the prior classification was an error and that it is immaterial to all annual and quarterly periods previously presented. However, to facilitate period-over-period comparisons, the Company has revised its prior period financial statements to reflect the corrections in the period in which the expenses were incurred.

The effect of the revisions to the consolidated statements of operations for the three and nine months ended September 30, 2012, is as follows (in thousands):

	Three Months Ended							Nine Months Ended
	As Previously Reported		Adjustment			As Revised		As Previously Reported		Adjustment			As Revised
Cost of revenue	$	109,995	$	24,226		$	134,221	$	320,018	$	70,388		$	390,406
Research and development	19,351		—			19,351		54,373		—			54,373
Sales and marketing	75,924		(20,718		)	55,206		219,096		(58,415		)	160,681
General and administrative	54,511		(3,508		)	51,003		168,214		(11,973		)	156,241
Amortization of acquired intangible assets	5,381		—			5,381		15,611		—			15,611
Restructuring charges	—		—			—		14		—			14
Total costs and operating expenses	$	265,162	$	—		$	265,162	$	777,326	$	—		$	777,326

The classification error did not affect reported revenue, total costs and operating expenses, income from operations, net income, net income per share, cash flows or any balance sheet line item.

During the third quarter of 2013, the Company identified immaterial classification errors in its historical consolidated statements of cash flows. The errors relate to the timing of cash payments for property and equipment, cash receipts from employees for common stock related to the Company's employee stock purchase plan and cash payments for lease deposits. The cash flows for these items were improperly reflected as changes in operating assets and liabilities rather than as investing or financing activities. There was no impact to the net change in cash and cash equivalents. The Company concluded these errors are immaterial to all annual and quarterly periods previously presented and has reflected the corrections as a revision to the consolidated statements of cash flows previously filed.

The effect of the revisions to the consolidated statements of cash flows for the nine months ended September 30, 2012, is as follows (in thousands):

	As Previously Reported		Adjustment		As Revised
Cash flows from operating activities:
Changes in operating assets and liabilities, net of effects from acquisitions:
Prepaid expenses and other current assets	11,103		(1,093	)	10,010
Accounts payable and accrued expenses	54,732		(5,583	)	49,149
Other non-current assets and liabilities	(536	)	432		(104	)
Net cash provided by operating activities	383,551		(6,244	)	377,307
Cash flows from investing activities:
Purchases of property and equipment	(119,256	)	140		(119,116	)
Other non-current assets and liabilities	—		979		979
Net cash used in investing activities	(669,346	)	1,119		(668,227	)
Cash flows from financing activities:
Proceeds related to the issuance of common stock under stock plans	28,635		5,125		33,760
Net cash used in financing activities	(91,991	)	5,125		(86,866	)
Net decrease in cash and cash equivalents	(376,547	)	—		(376,547	)