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Akamai will discuss the acquisition on its Q4 and year end 2021 financial results conference call today, February 15, at 4:30 p.m. ET.
CAMBRIDGE, Mass., Feb. 15, 2022 – Akamai Technologies, Inc. (NASDAQ: AKAM), the world's most trusted solution to power and protect digital experiences, today announced it has entered into a definitive agreement to acquire Linode, one of the easiest-to-use and most trusted infrastructure-as-a-service (IaaS) platform providers.
Modern digital experiences, including virtual environments like the metaverse, are created through the convergence of media, entertainment, technology, ecommerce, financial services, and online games. #akamai has been a key partner to the world’s leaders in these industries for decades by powering and protecting applications in today’s multi-cloud, multi-platform world. Together with Linode, which has made it simple, affordable and accessible for developers to consume cloud computing, #akamai will become the world’s most distributed compute platform, from cloud to edge.
“The opportunity to combine Linode’s developer-friendly cloud computing capabilities with Akamai’s market-leading edge platform and security services is transformational for #akamai,” said #drtomleighton, chief executive officer and co-founder, #akamai Technologies. “Akamai has been a pioneer in the edge computing business for over 20 years, and today we are excited to begin a new chapter in our evolution by creating a unique cloud platform to build, run and secure applications from the cloud to the edge. This a big win for developers who will now be able to build the next generation of applications on a platform that delivers unprecedented scale, reach, performance, reliability and security.”
Christopher Aker, founder and chief executive officer, Linode, added, “We started Linode 19 years ago to make the power of the cloud easier and more accessible. Along the way, we built a cloud computing platform trusted by developers and businesses around the world. Today, those customers face new challenges as cloud services become all-encompassing, including compute, storage, security and delivery from core to edge. Solving those challenges requires tremendous integration and scale which #akamai and Linode plan to bring together under one roof. This marks an exciting new chapter for Linode and a major step forward for our current and future customers.”
Under terms of the agreement, #akamai has agreed to acquire all of the outstanding equity of Linode Limited Liability Company for approximately $900 million, after customary purchase price adjustments. As a result of structuring the transaction as an asset purchase, #akamai expects to achieve cash income tax savings over the next 15 years that have an estimated net present value of approximately $120 million. The transaction is expected to close in the first quarter of 2022 and is subject to customary closing conditions.
For fiscal year 2022, the acquisition of Linode is anticipated to add approximately $100 million in revenue and be slightly accretive to non-GAAP EPS by approximately $0.05 to $0.06. #akamai will provide additional details on Linode, along with Q4 and year end 2021 financial results and full year guidance on its earnings call today, February 15, 2022, at 4:30 p.m. ET.
Advisors on the Transaction
PJT Partners served as financial advisor and WilmerHale served as legal counsel to #akamai. DH Capital served as financial advisor and Latham & Watkins served as legal counsel to Linode.
Conference call scheduled today, Tuesday, February 15 at 4:30 p.m. ET
Akamai will discuss the acquisition of Linode during its Q4 and year end 2021 financial results conference call today, February 15, 2022, at 4:30 p.m. Eastern time. The call may include forward-looking financial guidance from management. The call can be accessed through (844) 578-9671 (or (508) 637-5655 for international calls) using conference ID number 7579719. A live webcast of the call and the accompanying slides may be accessed in the Investor Relations section of www.akamai.com. In addition, a replay of the call will be available for two weeks following the conference through the #akamai website or by calling (855) 859-2056 (or (404) 537-3406 for international calls) and using conference ID number 7579719.
Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally accepted accounting principles in the United States of America (GAAP), #akamai provides additional financial metrics that are not prepared in accordance with GAAP (non-GAAP). Management uses non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation and to evaluate Akamai's financial performance. The non-GAAP financial measure used in this release is non-GAAP net income per diluted share.
Management believes that this non-GAAP financial measure reflects Akamai's ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as it facilitates comparing financial results across accounting periods and to those of our peer companies. Management also believes that this non-GAAP financial measure enables investors to evaluate Akamai's operating results and future prospects in the same manner as management. The non-GAAP net income per diluted share metric excludes expenses and gains that may be unusual in nature, infrequent or not reflective of Akamai's ongoing operating results.
This non-GAAP financial measure does not replace the presentation of Akamai's GAAP financial results and should only be used as a supplement to, not as a substitute for, Akamai's financial results presented in accordance with GAAP. For historical non-GAAP measures, #akamai has provided a reconciliation of each non-GAAP financial measure used in its financial reporting and investor presentations to the most directly comparable GAAP financial measure. These reconciliations can be found under the caption “Reconciliation of GAAP to Non-GAAP Financial Measures” on the Investor Relations section of Akamai's website.
Akamai provides forward-looking statements in the form of guidance and other expressions of expectations about future performance. These forward-looking statements are provided on a non-GAAP basis and cannot be reconciled to the closest GAAP measure without unreasonable effort because of the unpredictability of the amounts and timing of events affecting the items we exclude from non-GAAP measures. For example, stock-based compensation is unpredictable for Akamai’s performance-based awards, which can fluctuate significantly based on current expectations of future achievement of performance-based targets. Amortization of intangible assets, acquisition-related costs and restructuring costs are all impacted by the timing and size of potential future actions, which are difficult to predict. In addition, from time to time, #akamai excludes certain items that occur infrequently, which are also inherently difficult to predict and estimate. It is also difficult to predict the tax effect of the items we exclude and to estimate certain discrete tax items, like the resolution of tax audits or changes to tax laws. As such, the costs that are being excluded from non-GAAP projections are difficult to predict and a reconciliation or a range of results could lead to disclosure that would be imprecise or potentially misleading. Material changes to any one of the exclusions could have a significant effect on our guidance and future GAAP results.
Akamai’s definition of the non-GAAP measure used in this press release is outlined below:
Non-GAAP net income per diluted share – Non-GAAP net income divided by weighted average diluted common shares outstanding. Diluted weighted average shares outstanding are adjusted in non-GAAP per share calculations for the shares that would be delivered to #akamai pursuant to the note hedge transactions entered into in connection with the issuances of $1,150 million of convertible senior notes due 2027 and 2025, respectively. Under GAAP, shares delivered under hedge transactions are not considered offsetting shares in the fully-diluted share calculation until they are delivered. However, the company would receive a benefit from the note hedge transactions and would not allow the dilution to occur, so management believes that adjusting for this benefit provides a meaningful view of operating performance. With respect to the convertible senior notes due in each of 2027 and 2025, unless Akamai's weighted average stock price is greater than $116.18 and $95.10, respectively, the initial conversion price, there will be no difference between GAAP and non-GAAP diluted weighted average common shares outstanding.
Non-GAAP net income – GAAP net income adjusted for the following tax-affected items: amortization of acquired intangible assets; stock-based compensation; amortization of capitalized stock-based compensation; acquisition-related costs; restructuring charges; gains and losses on legal settlements; costs incurred related to endowments to the #akamai Foundation; amortization of debt discount and issuance costs; amortization of capitalized interest expense; certain gains and losses on investments; income and losses from equity method investment; and other non-recurring or unusual items that may arise from time to time.
The non-GAAP adjustments, and Akamai's basis for excluding them from non-GAAP financial measures, are outlined below:
Further information in the press release to download
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