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Statement Of Financial Position Classified - USD ($) $ in Thousands	6 Months Ended
Jun. 30, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$ 321,083	$ 156,074
Marketable securities (including restricted securities of $3,330 at June 30, 2009 and $3,460 at December 31, 2008)	298,943	174,557
Accounts receivable, net of reserves of $16,540 and $11,270 at June 30, 2009 and December 31, 2008, respectively	144,537	139,612
Prepaid expenses and other current assets	33,161	27,124
Deferred income tax assets	4,542	4,542
Total current assets	802,266	501,909
Property and equipment, net	174,742	174,483
Marketable securities (including restricted securities of $153 each at June 30, 2009 and December 31, 2008)	306,752	440,996
Goodwill	441,875	441,258
Other intangible assets, net	84,518	92,995
Deferred income tax assets, net	173,749	223,718
Other assets	5,068	5,592
Total assets	1,988,970	1,880,951
Current liabilities:
Accounts payable	19,279	21,165
Accrued expenses and other current liabilities	41,419	66,132
Deferred revenue	28,082	11,506
Accrued restructuring	1,148	1,653
Total current liabilities	89,928	100,456
Other liabilities	14,802	10,619
Deferred revenue	3,494	1,251
1% convertible senior notes	199,855	199,855
Total liabilities	$ 308,079	$ 312,181
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	$ 0	$ 0
Common stock, $0.01 par value; 700,000,000 shares authorized; 173,515,314 shares issued and 172,802,114 shares outstanding at June 30, 2009 and 169,371,675 shares issued and outstanding at December 31, 2008	1,735	1,694
Additional paid-in capital	4,581,290	4,539,154
Accumulated other comprehensive income (loss)	(12,500)	(24,350)
Treasury stock, at cost, 713,200 shares	(14,994)	0
Accumulated deficit	(2,874,640)	(2,947,728)
Total stockholders' equity	1,680,891	1,568,770
Total liabilities and stockholders' equity	$ 1,988,970	$ 1,880,951

Statement Of Cash Flows Indirect - USD ($) $ in Thousands	6 Months Ended
Statement Of Cash Flows Indirect - USD ($) $ in Thousands	Jun. 30, 2009	Jun. 30, 2008
Cash flows from operating activities:
Net income	$ 73,088	$ 71,245
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	58,356	46,058
Stock-based compensation expense	28,387	28,248
Provision for deferred income taxes, net	43,167	43,952
Amortization of deferred financing costs	420	420
Provision for doubtful accounts	3,521	736
Excess tax benefits from stock-based compensation	(658)	(10,282)
Loss (gain) on investments and loss on disposal of property and equipment, net	(387)	(303)
Gain on divesture of certain assets	(1,062)	0
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	10,660	(5,708)
Prepaid expenses and other current assets	(4,275)	(8,815)
Accounts payable, accrued expenses and other current liabilities	(21,337)	(8,107)
Deferred revenue	946	1,099
Accrued restructuring	(675)	(543)
Other non-current assets and liabilities	4,149	(197)
Net cash provided by operating activities	194,300	157,803
Cash flows from investing activities:
Purchases of property and equipment	(34,033)	(45,943)
Capitalization of internal-use software development costs	(13,687)	(12,579)
Purchases of short- and long-term marketable securities	(163,882)	(358,459)
Proceeds from sales of short- and long-term marketable securities	141,511	154,033
Proceeds from maturities of short- and long-term marketable securities	50,161	95,782
Cash paid for acquisition of business	(5,779)	0
Proceeds from divesture of certain assets	1,350	0
Proceeds from the sale of property and equipment	4	74
Decrease in restricted investments held for security deposits	130	0
Net cash used in investing activities	(24,225)	(167,092)
Cash flows from financing activities:
Proceeds from the issuance of common stock under stock option and employee stock purchase plans	10,763	18,132
Excess tax benefits from stock-based compensation	658	10,282
Repurchase of common stock	(16,905)	0
Net cash (used in) provided by financing activities	(5,484)	28,414
Effects of exchange rate changes on cash and cash equivalents	418	1,214
Net increase in cash and cash equivalents	165,009	20,339
Cash and cash equivalents at beginning of period	156,074	145,078
Cash and cash equivalents at end of period	321,083	165,417
Supplemental disclosure of cash flow information:
Cash paid for income taxes	17,773	7,211
Cash paid for interest	999	999
Non-cash financing and investing activities:
Capitalization of stock-based compensation as internal-use software	3,152	3,591
Common stock returned upon settlement of escrow claims related to prior business acquisitions	$ (213)	$ (952)

Notes to Financial Statements

6 Months Ended

Jun. 30, 2009

Notes to Financial Statements [Abstract]

1. Nature of Business and Basis of Presentation

1. 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 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, 2008, filed with the Securities and Exchange Commission on March 2, 2009.

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.

The Company evaluated subsequent events through August 10, 2009, the date it filed its report on Form 10-Q for the quarter ended June 30, 2009 with the Securities and Exchange Commission, and had no material subsequent events to report.

2. Recent Accounting Pronouncements

2. Recent Accounting Pronouncements

On January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”). FSP 157-2 delayed until the beginning of the first quarter of fiscal 2009 the effective date of Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurement,” for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of FSP 157-2 on January 1, 2009 did not have a material impact on the Company’s consolidated financial statements.

On January 1, 2009, the Company adopted FSP Emerging Issues Task Force 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings and selected financial data) to conform with the provisions in FSP EITF 03-6-1. The adoption of FSP EITF 03-6-1 did not have a material impact on the Company’s consolidated financial statements.

On January 1, 2009, SFAS No. 141 (revised 2007), “Business Combinations,” (“SFAS No. 141R”), became effective for the Company. SFAS No. 141R significantly changes the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS No. 141R may have a material impact on the Company’s consolidated financial statements if or when it enters into any business combinations in the future.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” (“FSP FAS 107-1”). FSP FAS 107-1 amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. FSP FAS 107-1 also amends APB 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. FSP FAS 107-1 is effective for periods ending after June 15, 2009. The adoption of FSP FAS 107-1 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That are Not Orderly” (“FSP FAS 157-4”). FSP FAS 157-4 clarifies how companies should determine fair value measurements when the level of market activity for an asset or liability has significantly decreased. FSP FAS 157-4 is effective for periods ending after June 15, 2009. The adoption of FSP FAS 157-4 did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP FAS 115-2 and FSP FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FSP FAS 124-2”). FSP FAS 115-2 and FSP FAS 124-2 require an entity to recognize the credit component of an other-than-temporary impairment of a debt security in earnings and non-credit component in other comprehensive loss when the entity does not intend to sell the security and it is more likely than not that the entity will not be required to sell the security prior to recovery. FSP FAS 115-2 and FSP FAS 124-2 are effective for periods ending after June 15, 2009. As of June 30, 2009, the Company did not have any debt securities that had other-than-temporary impairments that contained both a credit and non-credit component. Accordingly, adoption of FSP FAS 115-2 and FSP FAS 124-2 did not have an impact on the Company’s consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or annual financial reporting periods ending after June 15, 2009. The Company adopted SFAS No. 165 as of June 30, 2009, which was the required effective date. The Company evaluated its June 30, 2009 consolidated financial statements for subsequent events through August 10, 2009, the date the financial statements were issued. The Company is not aware of any subsequent events that would require recognition or disclosure in the financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of SFAS No. 162” (the “Codification”). The Codification will become the single source for all authoritative United States generally accepted accounting principles (“U.S. GAAP”) recognized by the FASB to be applied for financial statements issued for interim and annual periods ending after September 15, 2009. The Codification does not change U.S. GAAP and is not expected to have an effect on the Company’s financial position, results of operations or liquidity.

3. Business Acquisition

3. Business Acquisition

aCerno

In November 2008, the Company acquired all of the outstanding common and preferred stock of the parent entity of aCerno, Inc. (“acerno”) including vested stock options, in exchange for approximately $89.5 million in cash paid in 2008 and in the first quarter of 2009. The purchase of acerno was intended to augment Akamai’s Internet advertising-related offerings, which are designed to help customers more effectively target online advertising to the desired audience. The aggregate purchase price of $90.8 million consisted of $89.5 million in cash and $1.3 million of transaction costs, which primarily consisted of fees for legal and financial advisory services.

The acquisition of acerno was accounted for using the purchase method of accounting. The results of operations of the acquired business have been included in the consolidated financial statements of the Company since November 3, 2008, the date of acquisition. The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, as determined by management and, with respect to identifiable intangible assets, by management with the assistance of an appraisal provided by a third-party valuation firm. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed was recorded as goodwill. The value of the goodwill from this acquisition can be attributed to a number of business factors including, but not limited to, potential sales opportunities to provide Akamai services to acerno customers; a trained technical workforce in place in the United States; an existing sales pipeline and a trained sales force. In accordance with current accounting standards, goodwill associated with the acerno acquisition will not be amortized and will be tested for impairment at least annually as required by SFAS No. 142, “Goodwill and Other Intangible Assets.”

The following table presents the allocation of the purchase price for acerno:


	(In thousands)
Total consideration:
Cash paid	$	89,520
Transaction costs		1,294

Total purchase consideration	$	90,814

Allocation of the purchase consideration:
Current assets	$	5,249
Property and equipment		1,720
Identifiable intangible assets		19,400
Goodwill		80,901
Deferred tax liabilities		(7,516	)
Other liabilities assumed		(8,940	)

	$	90,814

The following were the identified intangible assets acquired and the respective estimated periods over which such assets will be amortized:


	Amount		Weighted average useful life
	(In thousands)		(In years)
Completed technologies	$	9,200	2.5
Customer relationships		4,300	4.1
Non-compete agreements		5,600	2.5
Trade names		300	1.5

Total	$	19,400

In determining the purchase price allocation, the Company considered, among other factors, its intention to use the acquired assets and the historical and estimated future demand for acerno services. The fair value of intangible assets was based upon the income approach. In applying this approach, the values of the intangible assets acquired were determined using projections of revenues and expenses specifically attributed to the intangible assets. The income streams were then discounted to present value using estimated risk adjusted discount rates. The rate used to discount the expected future net cash flows from the intangible assets to their present values was based upon a weighted average cost of capital of 15%. The discount rate was determined after consideration of market rates of return on debt and equity capital, the weighted average return on invested capital and the risk associated with achieving forecasted sales related to the technology and assets acquired from acerno.

The customer relationships were valued using the excess earnings method of income approach. The key assumptions used in valuing the customer relationships were as follows: discount rate of 15%, tax rate of 35% and estimated average economic life of seven years.

The relief-from-royalty method was used to value the completed technologies acquired from acerno. The relief-from-royalty method estimates the cost savings that accrue to the owner of an intangible asset that would otherwise be required to pay royalties or license fees on revenues earned through the use of the asset. The royalty rate used is based on an analysis of empirical, market-derived royalty rates for guideline intangible assets. Typically, revenue is projected over the expected remaining useful life of the completed technology. The market-derived royalty rate is then applied to estimate the royalty savings. The key assumptions used in valuing the completed technologies are as follows: royalty rate of 10%, discount rate of 15%, tax rate of 35% and estimated average economic life of five years.

The lost-profits method was used to value the non-compete agreements Akamai entered into with certain members of acerno’s management team. The lost-profits method recognizes that the current value of an asset may be premised upon the expected receipt of future economic benefits protected by clauses within an agreement. These benefits are generally considered to be higher income resulting from the avoidance of a loss in revenue that would likely occur without an agreement. The key assumptions used in valuing the non-compete agreements were as follows: discount rate of 15%, tax rate of 35% and estimated average economic life of five years.

The relief-from-royalty method was used to value trade names. The relief-from-royalty method recognizes that the current value of an asset may be premised upon the expected receipt of future economic benefit in the use of trade names. These benefits are generally considered to be higher income resulting from the avoidance of a loss in revenue that would likely occur without the specific trade names. The key assumptions used in valuing trade names were as follows: royalty rate of 1%, discount rate of 15%, tax rate of 35% and estimated average economic life of three years.

The total weighted average amortization period for the intangible assets acquired from acerno is 2.8 years. The intangible assets are being amortized based upon the pattern in which the economic benefits of the intangible assets are being utilized, which in general reflects the cash flows generated from such assets. None of the goodwill or identifiable intangible assets resulting from the acerno acquisition is deductible for income tax purposes.

The Company’s pro forma results of operations, presented to give effect to the acquisition of acerno for periods prior to the acquisition, would not differ materially from the Company’s reported results of operations.

4. Marketable Securities and Investments

4. Marketable Securities and Investments

The Company accounts for financial assets and liabilities in accordance with SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 provides a framework for measuring fair value under generally accepted accounting principles in the United States and requires expanded disclosures regarding fair value measurements. SFAS No. 157 defines fair value 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. SFAS No. 157 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 and other investment-related assets held at June 30, 2009 and December 31, 2008 (in thousands).


As of June 30, 2009	Cost		Gross Unrealized					Other-than- temporary Impairment Gains (Losses)			Aggregate Fair Value		Classified on Balance Sheet
			Gross Unrealized										Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses								Short-term Marketable Securities		Long-term Marketable Securities
*Available-for-sale securities:*
Certificates of deposit	$	484	$	—	$	—		$	—		$	484	$	381	$	103
Commercial paper		20,446		4		(7	)		—			20,443		20,443		—
U.S. corporate debt securities		243,163		2,497		(141	)		—			245,519		193,127		52,392
U.S. government agency obligations		82,160		351		(1	)		—			82,510		75,334		7,176
Auction rate securities		203,500		—		(23,211	)		—			180,289		—		180,289

		549,753		2,852		(23,360	)		—			529,245		289,285		239,960
*Trading securities:*
Auction rate securities		76,450		—		—			(9,658	)		66,792		—		66,792
*Other investment-related assets:*
Put option related to auction rate securities		—		—		—			9,658			9,658		9,658		—

	$	626,203	$	2,852	$	(23,360	)	$	—		$	605,695	$	298,943	$	306,752


As of December 31, 2008	Cost		Gross Unrealized					Other-than- temporary Impairment Gains (Losses)			Aggregate Fair Value		Classified on Balance Sheet
			Gross Unrealized										Short-term Marketable Securities		Long-term Marketable Securities
			Gains		Losses								Short-term Marketable Securities		Long-term Marketable Securities
*Available-for-sale securities:*
Certificates of deposit	$	640	$	—	$	—		$	—		$	640	$	487	$	153
Commercial paper		39,357		52		—			—			39,409		39,409		—
U.S. corporate debt securities		216,883		681		(2,593	)		—			214,971		85,907		129,064
U.S. government agency obligations		110,137		902		(12	)		—			111,027		48,754		62,273
Auction rate securities		210,600		—		(37,163	)		—			173,437		—		173,437

		577,617		1,635		(39,768	)		—			539,484		174,557		364,927
*Trading securities:*
Auction rate securities		76,500		—		—			(12,931	)		63,569		—		63,569
*Other investment-related assets:*
Put option related to auction rate securities		—		—		—			12,500			12,500		—		12,500

	$	654,117	$	1,635	$	(39,768	)	$	(431	)	$	615,553	$	174,557	$	440,996

Unrealized gains and unrealized temporary losses on investments classified as available-for-sale securities are included within accumulated other comprehensive income (loss), net within stockholders’ equity. Upon realization, those amounts are reclassified from accumulated other comprehensive income (loss), net to gain (loss) on investments, net in the statement of operations. All gains and losses on investments classified as trading securities are included within the statement of operations as gain (loss) on investments, net. Realized gains and losses and other-than-temporary impairments on investments classified as available-for-sale securities are reflected in the statement of operations as gain (loss) on investments, net. As of June 30, 2009, the Company had $280.0 million of auction rate securities and $8.9 million of U.S. corporate debt securities at cost with gross unrealized losses that have been in a continuous unrealized 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, 2009 (in thousands):


	Total Fair Value at June 30, 2009		Fair Value Measurements at Reporting Date Using
	Total Fair Value at June 30, 2009		Level 1		Level 2		Level 3
Money market funds	$	254,722	$	254,722	$	—	$	—
Certificates of deposit		484		484		—		—
Commercial paper		20,443		—		20,443		—
U.S. government agency obligations		82,510		—		82,510		—
U.S. corporate debt securities		245,519		—		245,519		—
Auction rate securities		247,081		—		—		247,081
Put option related to auction rate securities		9,658		—		—		9,658

	$	860,417	$	255,206	$	348,472	$	256,739

The following table reflects the activity for the Company’s major classes of assets measured at fair value using Level 3 inputs for the six months ended June 30, 2009 (in thousands):


	Auction Rate Securities			Put Option Related to Auction Rate Securities			Total
Balance as of December 31, 2008	$	237,006		$	12,500		$	249,506
Sales of securities		(7,150	)		—			(7,150	)
Unrealized gain included in accumulated other comprehensive income (loss), net		13,952			—			13,952
Unrealized gain on auction rate securities included in the statement of operations		3,273			—			3,273
Unrealized loss on other investment-related assets included in the statement of operations		—			(2,842	)		(2,842	)

Balance as of June 30, 2009	$	247,081		$	9,658		$	256,739

As of June 30, 2009, 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, 2009, 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, 2009, the fair value of the Company’s assets grouped using a Level 3 valuation consisted of auction rate securities (“ARS”) as well as a related put option described below. ARS are long-term variable rate bonds tied to short-term interest rates that may reset through a “Dutch auction” process that are designed to occur every seven to 35 days.

Historically, the carrying value (par value) of the ARS approximated fair market value due to the resetting of variable interest rates. Beginning in mid-February 2008 and continuing throughout the period ended June 30, 2009, however, the auctions for ARS then held by the Company were unsuccessful. 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 performed a discounted cash flow analysis to determine the estimated fair value of these investments. The discounted cash flow analysis performed by the Company 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 performed as of June 30, 2009 assumes a weighted average discount rate of 4.45% and expected term of five years. The discount rate was determined using a proxy based upon the current market rates for similar debt offerings within the AAA-rated ARS market. The expected term was based on management’s estimate of future liquidity. As a result, as of June 30, 2009, the Company has estimated an aggregate loss of $32.9 million, of which $23.2 million was related to the impairment of ARS deemed to be temporary and included in accumulated other comprehensive loss within stockholders’ equity, and of which $9.7 million was related to the impairment of ARS deemed other-than-temporary and included in gain (loss) on investments, net in the consolidated statement of operations. The impact for the three and six months ended June 30, 2009 was a net gain of $1.9 million and $14.0 million, respectively, included in accumulated other comprehensive loss within stockholders’ equity, related to ARS having impairments deemed to be temporary in nature, as well as a net gain of $0.1 million and $3.3 million, respectively, included in gain (loss) on investments, net in the consolidated statement of operations, related to the impairment of ARS deemed other-than-temporary. The aggregate net gain in the fair value of ARS experienced in the six months ended June 30, 2009 was due to a decrease in the weighted average discount rate used in the computation of fair values to 4.45% from 6.275% used as of December 31, 2008.

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, except as described below for ARS related to the put option, the Company believes it is more likely than not that it will not be required to sell the ARS prior to a recovery of par value and intends to hold the investments until such time because it believes it has sufficient cash and other marketable securities on-hand and from projected cash flows from operations such that it does not anticipate a need to sell its ARS prior to a recovery of par value.

In November 2008, the Company entered into an agreement with one of its investment advisors, which will require the advisor to repurchase the $76.5 million in par value of ARS purchased through such advisor at par value beginning on June 30, 2010 if the Company cannot liquidate such ARS before that time. Such agreement created a separate financial instrument between the two companies (the “put option”). For these particular ARS, Akamai expects to continue to hold these long-term debt instruments until the earlier of the settlement date or the date on which the market allows for active trading of ARS at par value. At any time during the period up until June 2010, the investment advisor can call the ARS at par value. These ARS were classified as trading securities as of December 31, 2008 and June 30, 2009.

The Company elected to apply the fair value option under SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” to the put option. As of December 31, 2008, the $12.5 million fair value of the put option was grouped with long-term marketable securities on the Company’s consolidated balance sheet. As of June 30, 2009, the fair value of the put option was reduced to $9.7 million. As a result, the Company recorded a net loss on investments of $2.8 million, included in gain (loss) on investments, net in the consolidated statement of operations for the six months ended June 30, 2009. The fair value of the put option was determined by comparing the fair values of the related ARS, as described above, to their par values and also considers the credit risk associated with the investment advisor. This put option will continue to be adjusted on each balance sheet date based on its then fair value. The fair value of the put option is based on unobservable inputs and is therefore classified as Level 3 in the hierarchy.

As of June 30, 2009 and December 31, 2008, the Company classified 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 following twelve months. Expected maturities of the Company’s marketable securities and other investment-related assets held at June 30, 2009 and December 31, 2008 are as follows:


	June 30, 2009		December 31, 2008
*Available-for-sale securities:*
Due in one year or less	$	289,285	$	174,710
Due after 1 year through 5 years		59,671		191,337
Due after 5 years		180,289		173,437
*Trading securities:*
Due after 5 years		66,792		63,569
*Other investment-related assets:*
Due in one year or less		9,658		—
Due after 1 year through 5 years		—		12,500

	$	605,695	$	615,553

As of June 30, 2009, $3.5 million of the Company’s marketable securities were classified as restricted. These securities primarily represent security for irrevocable letters of credit in favor of third-party beneficiaries, mostly related to facility leases. The letters of credit are collateralized by restricted marketable securities, of which $3.3 million are classified as short-term marketable securities and $0.2 million are classified as long-term marketable securities on the consolidated balance sheets. The restrictions on these marketable securities lapse as the Company fulfills its obligations or such obligations expire under the terms of the letters of credit. These restrictions are expected to lapse at various times through May 2011.

5. Accounts Receivable

5. Accounts Receivable

Net accounts receivable consisted of the following (in thousands):


	June 30, 2009			December 31, 2008
Trade accounts receivable	$	137,553		$	138,286
Unbilled accounts		23,524			12,596

Gross accounts receivable		161,077			150,882

Allowance for doubtful accounts		(10,021	)		(6,943	)
Reserve for cash-basis customers		(6,519	)		(4,327	)

Total accounts receivable reserves		(16,540	)		(11,270	)

Accounts receivable, net	$	144,537		$	139,612

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.

For presentation on the balance sheet at December 31, 2008, the Company reduced customer accounts receivable balances and deferred revenue by the amount of any deferred revenue recorded for customers that had a balance receivable. The reduction as of December 31, 2008 totaled $22.2 million. Beginning in the quarter ended March 31, 2009, the Company ceased to record such reduction for balance sheet presentation and now only records a reduction of customers’ accounts receivable balances for the amount of any deferred revenue related to services that have not yet commenced and any deferred revenue for customers from which collection is not reasonably assured. The actual reported deferred revenue on the balance sheet at December 31, 2008 was $12.8 million. That amount would have been $30.1 million if the new presentation had been applied at December 31, 2008.

6. Accrued Expenses and Other Current Liabilities

6. Accrued Expenses and Other Current Liabilities

Accrued expenses consisted of the following (in thousands):


	June 30, 2009		December 31, 2008
Payroll and other related benefits	$	19,924	$	26,377
Bandwidth and co-location		17,133		16,642
Property, use and other taxes		342		13,317
Legal professional fees		1,224		1,475
Other		2,796		8,321

Total	$	41,419	$	66,132

7. Net Income per Share

7. 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):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2009		2008		2009		2008
Numerator:
Net income	$	36,007	$	34,334	$	73,088	$	71,245
Add back of interest expense on 1% convertible senior notes, net of tax		440		434		866		860

Numerator for diluted net income	$	36,447	$	34,768	$	73,954	$	72,105

Denominator:
Denominator for basic net income per common share		172,561		167,417		171,540		166,688
Effect of dilutive securities:
Stock options		3,129		4,871		2,791		5,198
Effect of escrow contingencies		347		810		347		810
RSUs and deferred stock units		583		1,616		1,256		1,870
Assumed conversion of 1% convertible senior notes		12,936		12,927		12,936		12,927

Denominator for diluted net income per common share		189,556		187,641		188,870		187,493

Basic net income per common share	$	0.21	$	0.21	$	0.43	$	0.43
Diluted net income per common share	$	0.19	$	0.19	$	0.39	$	0.38

Outstanding options to acquire an aggregate of 3.0 million and 1.6 million shares of common stock for the three months ending June 30, 2009 and 2008, 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. Similarly, outstanding options to acquire an aggregate of 3.2 million and 1.6 million shares of common stock for the six months ending June 30, 2009 and 2008, 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. Additionally, 3.3 million and 2.6 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, 2009 and 2008, 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.

8. Stockholders' Equity

8. 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 million of the Company’s common stock from time to time on the open market or in privately negotiated transactions. 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. The Company may choose to suspend or discontinue the repurchase program at any time.

During the three months ended June 30, 2009, the Company repurchased 713,200 shares of its common stock for $15.0 million. As of June 30, 2009, the Company had $85.0 million available for future purchases of shares under its repurchase program. Additionally, as of June 30, 2009, the Company had prepaid $1.9 million for purchases of its common stock which had a settlement date in early July 2009.

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, 2009 and 2008 (in thousands):


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2009			2008			2009			2008
Stock-based compensation expense by type of award:
Stock options	$	4,429		$	5,468		$	9,277		$	11,640
Deferred stock units		2,085			1,885			2,085			1,885
RSUs		7,187			10,667			18,327			16,454
Shares issued under the Employee Stock Purchase Plan		863			897			1,850			1,860
Amounts capitalized as internal-use software		(1,244	)		(1,920	)		(3,152	)		(3,591	)

Total stock-based compensation before income taxes		13,320			16,997			28,387			28,248
Less: Income tax benefit		(5,055	)		(5,133	)		(11,072	)		(8,550	)

Total stock-based compensation, net of taxes	$	8,265		$	11,864		$	17,315		$	19,698

Effect of stock-based compensation on income by line item:
Cost of revenues	$	489		$	599		$	1,050		$	1,165
Research and development expense		2,223			2,662			4,949			5,110
Sales and marketing expense		6,024			7,104			13,064			12,053
General and administrative expense		4,584			6,632			9,324			9,920
Provision for income taxes		(5,055	)		(5,133	)		(11,072	)		(8,550	)

Total cost related to stock-based compensation, net of taxes	$	8,265		$	11,864		$	17,315		$	19,698

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, 2009 also included stock-based compensation reflected as a component of amortization of capitalized internal-use software; such additional stock-based compensation was $1.5 million and $2.8 million, respectively, before tax. The Company’s consolidated statements of operations for the three and six months ended June 30, 2008 also included stock-based compensation reflected as a component of amortization of capitalized internal-use software; such additional stock-based compensation was $1.0 million and $1.9 million, respectively, before tax.

Akamai has selected the Black-Scholes option pricing model to determine the fair value of the Company’s stock option awards. This model requires the input of subjective assumptions, including expected stock price volatility and estimated life of each award. The estimated fair value of Akamai’s stock-based awards, less expected forfeitures, is amortized over the awards’ vesting period on a straight-line basis. Expected volatilities are based on the Company’s historical stock price volatility and implied volatility from traded options in its stock. The Company uses historical data to estimate the expected life of options granted within the valuation model. The risk-free interest rate for periods commensurate with the expected life of the option is based on the U.S. Treasury yield rate in effect at the time of grant.

The grant-date fair values of option awards granted during the three and six months ended June 30, 2009 and 2008 were estimated using the following weighted-average assumptions:


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2009	2008	2009	2008
Expected life (years)	4.1	4.1	4.1	4.1
Risk-free interest rate (%)	1.9	3.1	1.6	2.7
Expected volatility (%)	52.5	47.8	56.1	50.3
Dividend yield (%)	—	—	—	—

For the three months ended June 30, 2009 and 2008, the weighted average fair value of Akamai’s stock option awards granted in those periods was $8.92 per share and $14.38 per share, respectively. For the six months ended June 30, 2009 and 2008, the weighted average fair value of Akamai’s stock option awards granted in those periods was $7.99 per share and $13.92 per share, respectively.

The grant-date fair values of Akamai’s Employee Stock Purchase Plan (“ESPP”) awards granted during the three and six months ended June 30, 2009 and 2008 were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2009	2008	2009	2008
Expected life (years)	0.5	0.5	0.5	0.5
Risk-free interest rate (%)	0.4	2.7	0.4	2.9
Expected volatility (%)	70.1	53.2	69.3	52.1
Dividend yield (%)	—	—	—	—

For the three months ended June 30, 2009 and 2008, the weighted average fair value of ESPP awards granted in those periods was $2.96 per share and $5.89 per share, respectively. For the six months ended June 30, 2009 and 2008, the weighted average fair value of ESPP awards granted in those periods was $2.63 per share and $5.74 per share, respectively.

As of June 30, 2009, the total pre-tax unrecognized compensation cost for stock options, RSUs and stock issued under the ESPP was $95.9 million. This non-cash expense is estimated to be recognized through 2013 over a weighted average period of 1.3 years. Nearly all of the Company’s employees have received grants through these equity compensation programs.

Stock Options

Options to purchase shares of the Company’s common stock are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, the Chief Executive Officer of the Company to whom such authority has been delegated. Options granted under the Company’s 1998 Stock Incentive Plan generally have a contractual life of ten years, while options granted under the Company’s 2006 Stock Incentive Plan have a contractual life of seven years. Options typically vest as to 25% of the shares one year from date of grant, with the remaining 75% of the shares vesting in twelve equal quarterly installments thereafter so that all options are vested in full at the end of four years from the date of grant. The exercise price of the option is the Company’s closing stock price on the effective date of grant. In May 2009, the Company’s stockholders approved the 2009 Stock Incentive Plan (the “2009 Plan”) for the issuance of incentive and nonqualified stock options, restricted stock awards and other types of equity awards. The total number of shares of common stock issuable under the 2009 Plan was 8,500,000 shares.

The following tables summarize the stock option activity under all of the Company’s stock incentive plans during the three and six months ended June 30, 2009 and 2008 (in thousands, except exercise prices):


	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2008	10,380		$	18.76
Granted	669			17.29
Exercised	(408	)		8.94
Forfeited and expired	(123	)		35.70

Outstanding at March 31, 2009	10,518			18.86
Granted	112			20.80
Exercised	(208	)		9.85
Forfeited and expired	(56	)		35.46

Outstanding at June 30, 2009	10,366			18.96

Exercisable at June 30, 2009	7,920			15.96


	Shares		Weighted Average Exercise Price
Outstanding at December 31, 2007	12,034		$	15.83
Granted	458			31.95
Exercised	(466	)		9.01
Forfeited and expired	(28	)		29.12

Outstanding at March 31, 2008	11,998			16.68
Granted	218			34.79
Exercised	(1,653	)		4.97
Forfeited and expired	(132	)		36.02

Outstanding at June 30, 2008	10,431			18.67

Exercisable at June 30, 2008	7,678			13.41

The total pre-tax intrinsic value of stock options exercised during the three months ended June 30, 2009 and 2008 was $2.2 million and $47.9 million, respectively. For the six months ended June 30, 2009 and 2008, the total pre-tax intrinsic value of stock options exercised was $4.1 million and $58.4 million, respectively. Cash proceeds from the exercise of stock options were $2.1 million and $8.2 million for the three months ended June 30, 2009 and 2008, respectively; and $5.7 million and $12.4 million for the six months ended June 30, 2009 and 2008, respectively.

Deferred Stock Units

The Company has granted deferred stock units (“DSUs”) to non-employee members of its Board of Directors and to the Company’s Executive Chairman. Each DSU represents the right to receive one share of the Company’s common stock upon vesting. The holder may elect to defer receipt of all or a portion of the vested shares of stock represented by the DSU for a period of at least one year but not more than ten years from the grant date. The DSUs typically vest with respect to 50% of the shares upon the first anniversary of the grant date with the remaining 50% of the shares vesting in equal installments of 12.5% each quarter thereafter so that all DSUs are vested in full at the end of two years from the date of grant.

The following tables summarize the DSU activity for the three and six months ended June 30, 2009 and 2008 (in thousands, except grant date fair values):


	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2008	207		$	24.86
Vested and distributed	—			—

Outstanding at March 31, 2009	207			24.86
Granted	97			21.56
Vested and distributed	(5	)		23.94

Outstanding at June 30, 2009	299			21.67


	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2007	196		$	15.03
Vested and distributed	(1	)		31.15

Outstanding at March 31, 2008	195			14.98
Granted	47			39.86
Vested and distributed	(2	)		19.85

Outstanding at June 30, 2008	240			19.84

The grant date fair value of each DSU is calculated based upon the Company’s closing stock price on the date of grant. The total fair value of DSUs that were expensed during the three months ended June 30, 2009 and 2008 was $2.1 million and $1.9 million, respectively. As of June 30, 2009, DSUs representing 120,352 shares of common stock were unvested, with a weighted average pre-tax intrinsic value of approximately $2.3 million and a weighted average remaining contractual life of approximately 1.7 years. These outstanding DSUs are expected to vest through May 2011. All DSUs vest upon fulfilling service conditions or, under certain circumstances, upon a director’s departure from the Board.

Restricted Stock Units

RSUs represent the right to receive one share of the Company’s common stock upon vesting. RSUs are granted at the discretion of the Board of Directors, a committee thereof or, subject to defined limitations, the Chief Executive Officer of the Company to whom such authority has been delegated. The Company has issued RSUs that vest based on the passage of time assuming continued service with the Company, as well as RSUs that vest only upon the achievement of defined performance metrics tied to corporate revenue and earnings per share targets.

The following table summarizes the different types of RSUs granted by the Company (in thousands):


	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2009	2008	2009	2008
RSUs with service-based vesting conditions	1,150	—	2,305	1,319
RSUs with performance-based vesting conditions	985	—	1,974	898

Total	2,135	—	4,279	2,217

For RSUs with service-based vesting conditions, the fair value was calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is being recognized over the vesting period. Most RSUs with service-based vesting provisions vest in installments over a three- or four-year period following the grant date.

For the three and six months ended June 30, 2009 and 2008, management measured compensation expense for performance-based RSUs based upon a review of the Company’s expected achievement of specified performance targets. Such compensation cost is being recorded using a graded-vesting method for each series of grants of performance-based RSUs, to the extent management has deemed that such awards are probable of vesting based upon the expected achievement of the specified targets. Management will continue to review periodically the Company’s expected performance and adjust the compensation cost, if needed, at such time.

The following table summarizes the RSU activity for the three and six months ended June 30, 2009 and 2008 (in thousands, except grant date fair values):


	Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2008	6,199		$	34.64
Granted	2,144			15.87
Vested	(2,945	)		17.48
Forfeited	(10	)		36.31

Outstanding at March 31, 2009	5,388			30.26
Granted	2,135			21.56
Vested	(105	)		33.01
Forfeited	(93	)		35.09

Outstanding at June 30, 2009	7,325			27.55


	Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2007	4,595		$	36.67
Granted	2,217			32.05
Vested	(395	)		35.56
Forfeited	(16	)		38.38

Outstanding at March 31, 2008	6,401			35.23
Vested	(28	)		54.07
Forfeited	(170	)		37.66

Outstanding at June 30, 2008	6,203			35.07

As of June 30, 2009, RSUs representing 7.3 million shares of common stock were outstanding and unvested, with an aggregate pre-tax intrinsic value of $140.5 million and a weighted average remaining contractual life of approximately 2.1 years. These RSUs are expected to vest through June 2012.

9. Comprehensive Income

9. Comprehensive Income

The following table presents the calculation of comprehensive income and its components (in thousands):


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2009			2008			2009			2008
Net income	$	36,007		$	34,334		$	73,088		$	71,245
Other comprehensive income (loss):
Foreign currency translation adjustments		3,527			(497	)		1,064			921
Change in unrealized gain (loss) on investments, net		5,552			(1,382	)		17,608			(17,120	)
Income tax (expense) benefit related to unrealized gain (loss) on investments, net		(2,151	)		731			(6,822	)		6,436

Other comprehensive income (loss)		6,928			(1,148	)		11,850			(9,763	)

Comprehensive income	$	42,935		$	33,186		$	84,938		$	61,482

Accumulated other comprehensive loss, net consisted of (in thousands):


	June 30, 2009			December 31, 2008
Foreign currency translation adjustment	$	62		$	(1,002	)
Net unrealized loss on investments, net of taxes		(12,562	)		(23,348	)

Total accumulated other comprehensive loss, net	$	(12,500	)	$	(24,350	)

10. Goodwill and Other Intangible Assets

10. Goodwill and Other Intangible Assets

The Company recorded goodwill and other intangible assets as a result of business acquisitions that occurred from 2000 through 2008. The Company also acquired license rights from the Massachusetts Institute of Technology in 1999. During the six months ended June 30, 2009, the Company made purchase accounting adjustments affecting goodwill of $0.6 million to reflect the final determination of the fair value of assumed liabilities and assets in connection with the acquisition of acerno.

Other intangible assets that are subject to amortization consist of the following (in thousands):


	June 30, 2009
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Completed technology	$	35,031	$	(8,230	)	$	26,801
Customer relationships		88,700		(36,433	)		52,267
Non-compete agreements		7,200		(2,169	)		5,031
Trademarks		800		(381	)		419
Acquired license rights		490		(490	)		—

Total	$	132,221	$	(47,703	)	$	84,518


	December 31, 2008
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Completed technology	$	35,031	$	(5,659	)	$	29,372
Customer relationships		88,700		(31,291	)		57,409
Non-compete agreements		7,200		(1,529	)		5,671
Trademarks		800		(257	)		543
Acquired license rights		490		(490	)		—

Total	$	132,221	$	(39,226	)	$	92,995

Aggregate expense related to amortization of other intangible assets for the three months ended June 30, 2009 and 2008 was $4.2 million and $3.5 million, respectively. For the six months ended June 30, 2009 and 2008, aggregate expense related to amortization of other intangible assets was $8.5 million and $7.1 million, respectively. Based on the Company’s other intangible assets as of June 30, 2009, aggregate expense related to amortization of other intangible assets is expected to be $8.2 million for the remainder of 2009, and $16.4 million, $16.4 million, $15.4 million and $12.6 million for fiscal years 2010, 2011, 2012 and 2013, respectively.

11. Concentration of Credit Risk

11. 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, 2009 and December 31, 2008, the Company held ARS, with an estimated fair value of $247.1 million and $237.0 million, respectively, that have experienced failed auctions, which have prevented the Company from liquidating those investments. As a result, the Company has classified these investments as long-term marketable securities on its consolidated balance sheet as of June 30, 2009. 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 2009. As of June 30, 2009, the Company had recorded a pre-tax cumulative unrealized loss of $23.2 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 10% or more of accounts receivable as of June 30, 2009 or as of December 31, 2008. The Company believes that, at June 30, 2009, concentration of credit risk related to accounts receivable is not significant.

12. 1% Convertible Senior Notes

12. 1% Convertible Senior Notes

As of June 30, 2009, the carrying amount and fair value of the Company’s 1% convertible senior notes were $199.9 million and $266.8 million, respectively. The initial, and current, conversion price of the 1% convertible senior notes is $15.45 per share (equivalent to 64.7249 shares of common stock per $1,000 principal amount of 1% convertible senior notes). The conversion price is subject to adjustment in certain events. The Company may redeem the 1% convertible senior notes on or after December 15, 2010 at the Company’s option at 100% of the principal amount together with accrued and unpaid interest. Conversely, holders of the 1% convertible senior notes may require the Company to repurchase all or a portion of such notes at 100% of the principal amount plus accrued and unpaid interest on certain specified dates beginning on December 15, 2010. In the event of a change of control of the Company, the holders may require Akamai to repurchase all or a portion of such 1% convertible senior notes at a repurchase price of 100% of the principal amount plus accrued and unpaid interest. Interest on the 1% convertible senior notes began to accrue as of the issue date and is payable semiannually on June 15 and December 15 of each year. The 1% convertible senior notes are senior unsecured obligations and are the same rank as all existing and future senior unsecured indebtedness of Akamai. The 1% convertible senior notes rank senior to all of the Company’s subordinated indebtedness. Deferred financing costs of $5.9 million, including the initial purchaser’s discount and other offering expenses, for the 1% convertible senior notes are being amortized over the first seven years of the term of these notes to reflect the put and call rights discussed above. Amortization of deferred financing costs of the 1% convertible senior notes was $210,000 and $420,000 each for the three and six-month periods ended June 30, 2009 and 2008. Using the effective interest method, the Company records the amortization of deferred financing costs as interest expense in the consolidated statement of operations.

13. Segment and Geographic Information

13. Segment and Geographic Information

Akamai’s chief decision-maker, as defined under SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information,” (“SFAS No. 131”) is the Chief Executive Officer and the executive management team. As of June 30, 2009, 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 by SFAS No. 131.

The Company deploys its servers into networks worldwide. As of June 30, 2009, the Company had $139.4 million and $35.3 million of property and equipment, net of accumulated depreciation, located in the United States and in foreign locations, respectively. As of December 31, 2008, the Company had $138.6 million and $35.9 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 and channel partners located both in the United States and certain foreign locations. For both the three and six months ended June 30, 2009, approximately 28% of revenues were derived from the Company’s operations outside the United States, including 17% from Europe. For the three and six months ended June 30, 2008, approximately 26% and 25% of revenues, respectively, was derived from the Company’s operations outside the United States, including 19% and 18%, respectively, from Europe during such periods. No single country outside the United States accounted for 10% or more of revenues during these periods. For the three and six months ended June 30, 2009 and 2008, no customer accounted for 10% or more of total revenues.

14. Income Taxes

14. Income Taxes

The Company’s effective income tax rate, including discrete items, was 39.0% and 39.4% for the six months ended June 30, 2009 and 2008, respectively. The effective income tax rate is based upon the estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable quarterly periods for 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 ESPP. For the six months ended June 30, 2009 and 2008, the effective income tax rates were higher than the federal statutory tax rate mainly due to the effects of accounting for stock-based compensation in accordance with SFAS No. 123(R), “Share-Based Payment,” and state income tax expense.

15. Commitments, Contingencies and Guarantees

15. 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. As of June 1, 2009, the Company is occupying an additional 110,000 square feet at its current location in Cambridge. These lease obligations have been included in the future lease commitment table below.

The expected minimum aggregate future obligations under non-cancelable leases as of June 30, 2009 were as follows (in thousands):


	Operating Leases
Remaining 2009	$	8,764
2010		21,275
2011		18,713
2012		17,721
2013		17,259
Thereafter		90,158

Total	$	173,890

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 2009 and for the years ending December 31, 2010, 2011 and 2012, the minimum commitments pursuant to these contracts in effect as of June 30, 2009, are $35.4 million, $19.3 million, $0.7 million and $0.3 million, respectively. As of June 30, 2009, the Company had entered into purchase orders with various vendors for aggregate purchase commitments of $33.6 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 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. The parties agreed to a modification narrowing the scope of the bar order, and on August 31, 2005, the Court issued an order preliminarily approving the settlement. On December 5, 2006, the U.S. Court of Appeals for the Second Circuit overturned the District Court’s certification of the class of plaintiffs who are pursuing the claims that would be settled in the settlement against the underwriter defendants. Thereafter, the District Court ordered a stay of all proceedings in all of the lawsuits pending the outcome of plaintiffs’ petition to the Second Circuit for rehearing en banc and resolution of the class certification issue. On April 6, 2007, the Second Circuit denied plaintiffs’ rehearing petition, but clarified that the plaintiffs may seek to certify a more limited class in the District Court. On June 25, 2007, the District Court signed an order terminating the settlement. On April 2, 2009, the plaintiffs filed a motion for preliminary approval of a new proposed settlement among plaintiffs, the underwriter defendants, the issuer defendants and the insurers for the issuer defendants. The Company believes that it has meritorious defenses to the claims made in the complaint, and it intends to contest the lawsuit vigorously. An adverse resolution of this action could have a material adverse effect on its financial condition and results of operations in the period in which the lawsuit is resolved. The Company is not presently able to estimate potential losses, if any, related to this lawsuit.

In addition, on or about October 3, 2007, a purported Akamai shareholder 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 Exchange Act. 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). Akamai 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 Ms. Simmonds 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 Ms. Simmonds 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 Ms. Simmonds’ 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 filed a Notice of Appeal on April 10, 2009. 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 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 FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others—an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34.” FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. FIN 45 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 SFAS No. 5, “Accounting for Contingencies, as Interpreted by FIN 45.” 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, 2009 was determined to be immaterial.

Statement Of Financial Position Classified (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2009	Dec. 31, 2008
Statement [Line Items]
Marketable securities, restricted securities	$ 3,330	$ 3,460
Accounts receivable, reserves	16,540	11,270
Marketable securities, restricted securities	$ 153	$ 153
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	173,515,314	169,371,675
Common stock, shares outstanding	172,802,114	169,371,675
Treasury stock, shares	713,200	0

Statement Of Income Alternative - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2009	Jun. 30, 2008	Jun. 30, 2009	Jun. 30, 2008
Statement [Line Items]
Revenues	$ 204,600	$ 194,004	$ 414,968	$ 381,023
Costs and operating expenses:
Cost of revenues	60,009	53,688	120,371	105,263
Research and development	9,378	9,519	20,234	18,823
Sales and marketing	41,437	41,188	83,707	77,132
General and administrative	35,144	33,803	71,212	67,069
Amortization of other intangible assets	4,238	3,491	8,477	7,081
Restructuring charge	0	0	454	0
Total costs and operating expenses	150,206	141,689	304,455	275,368
Income from operations	54,394	52,315	110,513	105,655
Interest income	4,059	5,490	8,799	13,531
Interest expense	(710)	(710)	(1,420)	(1,420)
Other income (expense), net	184	(970)	1,318	(494)
Gain (loss) on investments, net	105	64	560	272
Income before provision for income taxes	58,032	56,189	119,770	117,544
Provision for income taxes	22,025	21,855	46,682	46,299
Net income	$ 36,007	$ 34,334	$ 73,088	$ 71,245
Net income per weighted average share:
Basic	$ 0.21	$ 0.21	$ 0.43	$ 0.43
Diluted	$ 0.19	$ 0.19	$ 0.39	$ 0.38
Shares used in per share calculations:
Basic	172,561	167,417	171,540	166,688
Diluted	189,556	187,641	188,870	187,493

Document Information	6 Months Ended
Document Information	Jun. 30, 2009
Document Type	10-Q
Amendment Flag	false
Amendment Description	N.A.
Document Period End Date	Jun. 30, 2009

Entity Information - USD ($)	6 Months Ended
Entity Information - USD ($)	Jun. 30, 2009	Aug. 05, 2009	Jun. 30, 2008
Trading Symbol	AKAM
Entity Registrant Name	AKAMAI TECHNOLOGIES INC
Entity Central Index Key	0001086222
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		172,401,167
Entity Public Float			$ 5,674,700,000

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