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Akamai warns about earnings, sheds staff

The Internet content-distribution company issues a first-quarter earnings warning and says it will lay off 14 percent of its staff amid lower revenue.

Internet content-distribution company Akamai Technologies issued a first-quarter earnings warning Wednesday, saying it would lay off about 14 percent of its staff amid lower revenue.

The company said it would likely post earnings between $39 million and $41 million for the quarter ended March 31, coming in under previous predictions of $45 million. In large part because of the revenue shortfall, the company said it would lay off 182 employees.

But there was a silver lining to the news. The company said it would likely lose less money in the first quarter than it had expected, with pretax losses of $35 million to $38 million, instead of $45 million.

The company revised year-long guidance along the same lines, saying it would post substantially lower revenue than expected but also lose less money. The company said its funding situation remains stable, however.

"Our first-quarter shortfall and our revised guidance for the year is due primarily to lower than expected non-recurring revenue and to continuing fallout among dot-com customers," Akamai CEO George Conrades said in a statement.

"We have put our start-up losses and significant up-front capital expenditures behind us, our cash burn rate has decreased, and we expect it to continue to decline throughout the year."

The company, which offers customers like Yahoo and CNN services that speed their Web sites' downloads for customers, has been caught on the edges of the dot-com downturn, feeling less of the brunt than its customers thus far. Last quarter it exceeded analysts' earnings expectations and moved up its predicted point of profitability.

On Wednesday, it again moved up its profitability point, saying the company would break even on a pretax basis in the second quarter of 2002, instead of the third quarter. For 2001 as a whole, it said it would likely make $175 million to $190 million, instead of the previously expected $240 million, and would lose just $110 million to $120 million, down from $140 million.

The company still had $386 million in cash and securities at the beginning of 2001, and it recently signed financing agreements totaling $25 million, executives said. The company indicated it has no immediate plans to raise new capital beyond that amount.

Bloomberg contributed to this report.