Sandy Smith - Investor Relations Paul Sagan - President, Chief Executive Officer, Director J.D. Sherman - Chief Financial Officer

Jeff Peck - Thomas Weisel Mark Kelleher - Canaccord Adams John Walsh - Citigroup Research Todd Raker - Deutsche Bank Katherine Egbert - Jefferies & Co. Philip Winslow - Credit Suisse Harry Blount - Lehman Brothers Robert Stimson - WR Hambrecht Rod Ratliff - Stanford Group Aaron Kessler - Piper Jaffray Darren Aftahi - ThinkEquity Colby Synesael - Merriman Curhan Ben Abel

Good afternoon. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Akamai first quarter 2007 earnings conference call. (Operator Instructions) Ms. Smith, you may begin your conference.

Great, thank you. Good afternoon and thank you for joining Akamai's investor conference call to discuss our first quarter 2007 financial results. Speaking today will be Paul Sagan, Akamai's President and Chief Executive Officer, and J.D. Sherman, Akamai's Chief Financial Officer. Let me remind you that today’s presentation contains estimates and other statements that are forward-looking under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and assumptions that are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in Akamai's filings with the SEC, including our annual report on Form 10-K. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change and therefore you should not rely on these forward-looking statements as representing our estimates as of any date subsequent to today. During this call, we will be referring to some non-GAAP financial measures that we believe are helpful to a better understanding of our financial results and operations. These non-GAAP measures are not prepared in accordance with generally accepted accounting principals. You can find definitions of these non-GAAP terms and reconciliations of these non-GAAP terms to the most directly comparable GAAP financial measures under the news and publications portion of the investor relations section of our website. Before I turn the call over to Paul, I would like to comment on the release of our 8-K filing this afternoon. It is our practice to have our 8-K filings made after the market closes on the days we announce our quarterly results. Unfortunately, our financial printer which handles these filings for us mistakenly filed the 8-K early, posting it with the SEC when the markets were still open. They have apologized for this mistake. Now, let me turn the call over to Paul.

Thank you, Sandy, and thank you all for joining us today. Q1 was another quarter of double-digit sequential revenue growth for Akamai, as we delivered record revenue and normalized earnings. Our consolidated results for the first quarter include revenue of $139.3 million, an 11% increase over the fourth quarter and a 53% increase over the first quarter of 2006. Normalized net income of $50.7 million, or $0.28 per diluted share, a 7% quarter-over-quarter improvement and a 73% increase over normalized net income from the first quarter of last year. Building on the robust growth we experienced in 2006, these strong results in the first quarter demonstrate a continued momentum across all segments of our business. Our enterprise customers continue to move significant aspects of their business online and Akamai is there to help them, with compelling services for companies that want their websites to be users’ first stop for news and information, entertainment, and commerce. I will be back in a few minutes to talk about the trends we are seeing across the business and offer you an update on the progress we are making with our strategic acquisitions. Now, let me turn it over to J.D. who will review our first quarter results in detail. J.D. J.D. Sherman: Thank you, Paul. As Paul just highlighted, we had a very strong first quarter. Revenue grew 11% to $139.3 million. Coming off an exceptional fourth quarter, where we had some seasonal benefit from strong e-commerce, we again experienced healthy sequential growth in all of our core segments. Media and entertainment led the way, with expanding demand from both large, established media brands and growing innovative user-generated content customers, and e-commerce and software distribution contributed to our expanding top line as well. Additionally, our application performance sales team helped us to achieve the most successful quarter ever in the applications acceleration market, and that is even before adding the benefit of the Netli acquisition, for which we had 18 days of consolidated results and about $500,000 of incremental revenue in Q1. During the first quarter, Akamai's international sales represented 22% of total revenue, one point lower than fourth quarter levels, as the revenue we added from the Nine Systems and Netli acquisitions was primarily domestic. Resellers represented 20% of total revenue, up a point from the prior quarter. As per overall customer additions, in the first quarter we added 89 net new customers on an organic basis, and Netli brought an additional 45 net new customers to our business, not including those who were also Akamai customers, bringing our total customer count to 2,481. ARPU, or average revenue per customer, grew to $19,100 in the quarter, which is slightly higher than our fourth quarter ARPU, even after absorbing Nine Systems. We have not yet included any impact from Netli in our ARPU calculation, as we had only 18 days of Netli revenue in the quarter. As we experienced with the Speedera acquisition in 2005, we expect that the acquisitions will dampen our near-term ARPU growth but that over the long-term, the new customers and the new service offerings we have added from Nine Systems and Netli will help expand our revenue opportunities. Once again, no customer accounted for 10% or more of our revenue in the first quarter. Our GAAP gross profit margin, which includes both depreciation and stock compensation, was 75% for the quarter, or about 2 points lower than the prior quarter, in line with our expectations. About a point of this decline came from increased depreciation and stock-based compensation, while a point came from cash gross margins, which were 83% in Q1. GAAP operating expenses for the quarter were $77.6 million, up from $70.7 million in the prior quarter. These GAAP numbers include depreciation, amortization of intangible assets, and stock-based compensation charges. Excluding these non-cash charges, our cash operating expenses for the quarter were $57.1 million, up from $53 million in the prior quarter. This includes some normal seasonal impacts, such as Akamai's annual sales training summit and the reset of our payroll taxes, as well as the impact of our acquisitions in the quarter. Adjusted EBITDA for the first quarter was $58.8 million, up 11% from the prior quarter, and our adjusted EBITDA margin was 42%. That is up 5 points from the same period last year and consistent with fourth quarter levels. Total depreciation and amortization for the first quarter was $14.9 million, up from $11.8 million in the fourth quarter. These charges include: $10.4 million of network related depreciation; $1.7 million of G&A depreciation; and $2.8 million of amortization of intangible assets. Net interest income for the quarter was $4.7 million. Moving on to earnings, our GAAP net income for the quarter was $19.2 million, or $0.11 of earnings per diluted share. As a reminder, our GAAP net income includes non-cash charges for stock compensation related to FAS-123R and book tax charges at an effective annual rate of 40%. However, because of our significant deferred tax asset, we expect to pay cash taxes at an annualized rate of about 2%. During the first quarter, our stock-based compensation expense, including stock-based amortization, was $17 million, or $0.09 per share on a pretax basis. You can review the breakdown of our stock-based compensation charges by operating department in the supplemental metrics sheet posted on the investor relations section of our website. Additional non-cash items and GAAP net income for the quarter include $2.8 million of amortization of intangible assets and an $11.7 million non-cash tax charge. Excluding these non-cash items, our normalized net income for the first quarter was $50.7 million, up 7% over last quarter and 73% higher than our normalized net income for the same period last year. In the first quarter, we earned $0.28 per diluted share on a normalized basis, in line with our expectations. Our normalized weighted averaged diluted share count for the first quarter was 185.2 million shares, including the impact of the incremental shares from the Nine Systems and Netli transactions. Now let me review some balance sheet items. We ended the quarter with $480 million of cash, cash equivalents and marketable securities, up from $434.5 million at the end of the fourth quarter. Our cash from operations was $56.3 million. That is up 70% over the same period last year. Capital expenditures excluding stock-based compensation totaled $31.5 million in the first quarter, reflecting our pattern of front-loading our purchasing earlier in the year to take advantage of volume buying opportunities. We still expect that full year capital expenditures, excluding stock compensation, will be about 16% of revenue, consistent with 2006 levels. Days sales outstanding for the quarter were 56 days, consistent with Q4 levels. Overall, we had another great quarter, growing revenue 11% sequentially and 53% year over year, and delivering on our profit growth objective, even as we absorbed two strategic acquisitions. As I mentioned earlier, we closed Netli late in the quarter, giving us 18 days of impact from that acquisition in our first quarter results. We also had our first full quarter of Nine Systems in our Q1 numbers. As we move deeper into the integration of these acquisitions, we are even more convinced that they are important strategic investments that will broaden our solution portfolio and help fuel our future growth. We experienced continued strength in our organic business as well, and based on that strength, we remain confident that we will grow revenue between 42% and 46% for the year, or between $610 million and $625 million, consistent with our previous guidance. As for our earnings expectations, we are reiterating our guidance for normalized EPS of $1.26 to $1.30, or 43% to 48% year-over-year growth, which translates into normalized net income growth of at least 50% for the year. On margins, we came in where we expected in the first quarter with our gross margins reflecting increased depreciation costs and aggressive volume discounts we have offered to capture strategic customers in large multi-year deals that are very profitable on the bottom line. For the full year, we continue to expect that GAAP gross margins will decline by about 3 points, driven in part by these volume discounts and also by increased depreciation. However, as we have said in the past, we expect to offset any gross margin declines with continued operating efficiencies and scalability. Specifically, we anticipate that adjusted EBITDA margins will improve by about 4 points for the full year. For the second quarter, we expect revenue to be in the range of $149 million to $153 million. At the midpoint, that represents about 8% quarter over quarter growth and 10% growth at the high-end of the range. Given the short-term costs we associated with integrating the three acquisitions, we are expecting normalized earnings per diluted share for the second quarter in the range of $0.29 to $0.30, $0.01 to $0.02 higher than Q1 and a 50% increase year over year. We then expect normalized earnings per diluted share growth to accelerate a little on a quarter-over-quarter basis as the integrations progress, as indicated in our full-year guidance. As for non-cash items, we expect that the amortization of intangible assets will be approximately $11.4 million for the full year, including $3.3 million related to the Nine Systems acquisition and $700,000 related to Netli. We expect that the impact from Red Swoosh will be immaterial to full-year results. As for stock compensation charges, we now expect about $0.36 per share on a full-year pretax basis, which is $0.01 higher than our previous guidance due in part to some expenses associated with the acquisitions. Overall, we had a great start to the year. We continued our double-digit sequential growth and we made great progress integrating Nine Systems and Netli into our service offerings. Now, let me turn the call back over to Paul. Paul.

Thanks, J.D. As you have just heard, we had a great start in 2007. Demand for core content delivery and application acceleration services continued to grow in the first quarter and we believe this trend is continuing as we move into the second quarter. Given our recent acquisition activity, I wanted to give you a little more insight into the ways we have been planning and managing our business. This is an incredibly exciting and dynamic market, where customer needs are evolving rapidly to keep up with changing business requirements. That means not only do we have to deliver for our customers every day but we also have to keep our eyes on where the marketplace is headed. Several key areas that we have been focusing on for long-term product leadership include: first, meeting the growing need of media companies to manage, monetize and deliver their digital assets in the fast-moving, online entertainment market; second, helping to accelerate the migration of performance-sensitive business-to-business applications to the Internet; and third, realizing opportunities to continue to improve the cost and effectiveness of our delivery capabilities by extending our massive Edge server deployment. This deployment already extends into about 1,000 partner networks in several thousand physical locations and we want to take it even further into end-user devices, such as personal computers and set-top boxes. I am very pleased with our progress in each of these three development areas -- progress we have achieved through both internal investment and through strategic acquisitions. The purchase of Nine Systems directly addresses the first product development area I mentioned, the media and entertainment market. CBS’ recent interactive audience network announcement is instructive. This ambitious, multi-partner initiative will required a robust set of controls to capture the explosion in opportunity to deliver content online to users where they want it, when they want it, and the format they want. This is a great example of a trend we are seeing across the industry -- the use of syndication to increase the market opportunity for content producers. In the case of many customers, Akamai has been selected as the delivery platform, partly because of our leading content delivery capabilities combined with some of our new media asset management functionality. With the integration of the Nine Systems technology, we plan to continue to develop our capabilities and offer more of the functionality and tools we believe the market will require over the next few years. The acquisition of Netli addressed developments in the second area I mentioned -- the movement of our customers’ key applications online. The progress we are making to incorporate Netli’s protocol for application performance optimization into our network will further enhance Akamai's differentiated offerings in this area. We believe our easy-to-adopt and manage service is often the best way to improve application performance. This is because customers can avoid expensive hardware purchases and additional network management burdens. At the same time, they benefit from our vastly deployed network, which is uniquely designed to avoid inherent Internet latency with the greatest application performance. The new technology from Netli comes at a great time for us, because we have been seeing growing sales momentum that validates our decision to expand into this exciting market. Finally, by acquiring Red Swoosh, we believe we can extend our industry-leading delivery capabilities and further enable content owners to pursue innovative and profitable online business models. The customer experience in market research tells us that any successful client-side application for enterprises must include three critical components. First, it must be able to deliver quality of service and rights control. Second, it must be embedded with a robust back-end system that incorporates such functionality as dynamic mapping, quality of service optimization, authentication rights management, and security. And third, it must be combined with an edge network capable of handling large volumes of traffic while maintaining performance. We believe that only Akamai can deliver on all three of these components. Akamai has made significant investment over many years to develop an intelligent control overlay edge network that offers enterprises superior reliability, performance and scalability over the public Internet. As we explored how to extend this capability further to end users, we identified only one other group with the same vision for developing technology and meeting customer needs to control and deliver online assets, and that was Red Swoosh. That is why we were so delighted to make the Swoosh team and technology part of our initiative in this area. Underlying these three acquisitions is Akamai's fundamental belief that it is critical to use a decentralized approach to ensure optimal online content delivery and application performance. We found that Akamai's highly distributed architecture that enhances content distribution and application performance had significant advantages for customers over other solutions. These other solutions often rely on more traditional hosting and mirroring of content in a few locations, far from where end users really need it. Because of this fundamental difference in approach, investment and expertise, we are confident that Akamai's model and capabilities have uniquely positioned us to provide the tools and services enterprise customers will want to achieve their own online business objectives. The Internet plays a critical role for thousands of businesses today and that opportunity is expanding. Akamai's goal is the same as it has always been; to make the Internet more reliable, more scalable, and more secure for business. We are excited as ever about the way the Internet continues to develop and the opportunity we have to offer enabling technologies and services to businesses worldwide. In short, we are working very hard to offer innovations that meet the growing needs of our customers today and to develop the innovations that will address the needs of our customers in the future. So we look forward to updating you on our progress later in the year. Now, J.D. and I would be pleased to take your questions. Operator, can we have the first question, please?

(Operator Instructions) Yes, sir. Your first question comes from the line of Tim Klasell. Jeff Peck - Thomas Weisel: This is Jeff Peck actually sitting in for Tim. It looks like you guys are pretty positive about the application acceleration market. Can you briefly just go over what type of applications you are seeing demand for that for? What does the sales cycle look like? Are you still in kind of the evangelizing stage, trying to convince people to outsource that to you? Or are you seeing people really just come to you and demanding that yet?

Well, it is still fairly early in the development of the market and I think most buyers still think appliance first and service as a second idea, often when the boxed solution is not working. It is and I think will always be an enterprise sales cycle, so it is not an overnight sale. It is probably a six-month sales cycle but it certainly does seem to be going in the direction we would like it. We are seeing a wide range of applications. Business-to-business applications as companies put more and more of their mission critical processes online, but it is everything from say a fairly unique B2B portal application to something much more standard, such as an SAP installation that someone wants to run over the public Internet. So we are seeing a wide variety of companies. One of the really nice things we have seen is it opens up some new verticals, like manufacturing where traditionally we didn’t sell as effectively as we did in our traditional category. So we have been very pleased and seen pretty steady acceleration. As J.D. had mentioned, Q1 was the best we’ve seen for new deals in the space, and that was before Netli even came into the fold, so it adds to our optimism about that space and the value that we can bring. We are still pretty early so there is a lot of opportunity where we haven’t even begun to scratch the surface. Jeff Peck - Thomas Weisel: Okay, and then just one more question; any changes to your sales force plans to approach that market? Are you going to do any hiring or change how you guys sell that product?

I think the job that the sales force has done aligning to sell that, to train people to work with overlays in the right market, to find the right kind of prospects -- even the lead generation work and trial work we have done to demonstrate value to prospects has been terrific. I am very pleased with it so I think we will stay the course in the way we have been going. Jeff Peck - Thomas Weisel: Thank you.

Your next question comes from the line of Mark Kelleher. Mark Kelleher - Canaccord Adams: Thanks. I just wanted to go into the ARPU number a little bit. If I do my math right, am I adding 125 new customers for Nine Systems? Is that a ballpark number? J.D. Sherman: That was the number we gave last quarter, Mark, that’s right. Mark Kelleher - Canaccord Adams: Okay, and is it possible to give what the ARPU would have been without those, what the core ARPU number, sort of? J.D. Sherman: I don’t have the math right here in front of me, but when we did it, it was about 4% sequential growth excluding the Nine Systems add, so instead of about 1% including those 125 customers, 4% without. Mark Kelleher - Canaccord Adams: Okay, thanks. That’s helpful. And then, just following up a little more on that sales question, the last sales question; are you integrating at all these sales teams? Are these guys -- how are you cross-selling between these different acquisitions?

We run the company on a functional basis, so in every acquisition we fully integrate people into the existing Akamai teams. They do not stay a separate group, so engineers go into the engineering effort. So in the case of application acceleration, we had an engineering team. The engineers from Netli were incorporated directly into that team. The product management people were incorporated into our product management effort and the sales folks are incorporated into the sales team. We have also not bought things that were in completely new spaces so it really did not make sense to keep them separate. We are going to stick with the functional management structure and as we do acquisitions, we let people know very quickly when we close what their position is going to be in Akamai and then we train them and make them part of the existing organizations. Mark Kelleher - Canaccord Adams: Okay, great. Nice quarter. Thanks.

Your next question comes from the line of John Walsh. John Walsh - Citigroup Research: Good afternoon. Could you talk about the competitive environment, if anything has changed? Obviously a competitor has filed to go public. If you could just talk about the dynamics -- pricing, different market segments, maybe that you’ve seen any changes in the competitive landscape.

Well, I think things are pretty similar. We have always existed in a very competitive environment. You have been on these calls before. You have heard me talk about really three layers of competition. The first is really do-it-yourself. When we have a prospect, it is not that they do not have a website. They have always something pretty sophisticated up and running, and the first question is why should I outsource it at all? The second level of competition is the managed service provider, which is basically “I can do a little of everything and maybe that should be good enough” and the third is a direct competitor who says “Look, I’m a specialist too”. I think we do very well competing against all three categories. Some of those competitors are public, some are private, some are very, very large companies -- far bigger than we are -- some are much smaller. I think we focus on what our customers need, on meeting their needs to make their business models work in a few core segments. We love competition. It keeps us very sharp and we have had it for nine years and my guess is we will have it for 90 more, but I don’t see a fundamental change out there. John Walsh - Citigroup Research: Could you give a sense of the burst revenue? Was that mix -- excuse me -- pretty similar, the 70-30? And if any of the events like the March Madness, were they above what you had planned for in the quarter or any other again kind of one-off burst events that you maybe could highlight as above expectations? J.D. Sherman: I would say the bursting came in right in our expectation range. Not as high as it was in the fourth quarter where you have a lot of seasonal bursting, but still in the range of 70-30. As usual, we had events, as we do every quarter, March Madness was one, but none of the events are going to swing the quarter one way or another because we seem to be having these events almost in every quarter now. John Walsh - Citigroup Research: Okay, great. Thank you.

Your next question comes from the line of Todd Raker. Todd Raker - Deutsche Bank: Can I turn to the guidance? You guys started the year, guided 610 to 625. You’ve now acquired Netli, which admittedly did not have a huge impact this quarter, but on a revenue run-rate is a pretty significant impact for the full year. I guess the question I have for you is what has changed here in terms of your growth expectation to your business? Is there something going on? J.D. Sherman: Todd, we had factored in the Netli into our guidance in the last call, you may remember. We talked about including both Netli and Nine Systems and that we were bringing both businesses in and they had something between a $25 million and $30 million run-rate, so that is baked into the guidance that we gave last quarter and reaffirmed today. So really, we think the first quarter has put us right on track for that guidance, both with the performance we are seeing out of the acquisitions on the early side, as well as continued strength on our organic business, and really pleased with the growth we saw in the first quarter off of a really strong fourth quarter where you have a little bit of seasonal wind at your back. Todd Raker - Deutsche Bank: Okay, and then you guys have said on the adjusted EBITDA margin side, you think that is going to improve several hundred basis points here. I think for -- it has been relatively flat the last few quarters. What is the big driver in your mind that is going to start to move that up? J.D. Sherman: It is actually a trend that you can see if you went back to our first quarter of last year and the back-half of last year, the EBITDA margin started to flatten out a little bit. In the first quarter we had some pretty unique expense items, like our payroll tax resets and we spent some money on sales force training. And then in addition, we are absorbing a couple of acquisitions and the initial expense that goes with that as we bring those over. We have talked about that we expect Nine Systems to be an accretive acquisition, Netli to be roughly neutral, and Red Swoosh to be fairly immaterial but the early expenses associated with those we have in the early period. So I think a combination of the normal trends we have seen, absorbing the acquisitions and then continuing to drive scalability and efficiency as we grow the top line is really what is going to drive our growth in the back-half. Todd Raker - Deutsche Bank: Okay, and then one last question for Paul; just from a high level perspective, I think you have trained the street here that you guys put up good results and then typically, there is an expectation that numbers move up. As you look back at this quarter, is there something that surprised you in the market? Are we kind of going through the hyper-growth phase of this? Is there some change fundamentally out there?

No, actually, I was very pleased with the result. What we said last year in the first-half of the year is we were surprised at how fast the market was accelerating. Frankly, I think if you look at our guidance this year, it was for some pretty bold growth. If you look at the mid-range, it is almost 45% revenue growth. Now that we reported a quarter, almost a third of the way through the year, we still feel very comfortable that we are going to see what I think is an exceptionally strong growth off of a very large number last year and even stronger expansion on the bottom line. So no, I do not see anything fundamentally different. I’m extremely pleased with the performance. I think that some people may have gotten very comfortable with the fact that we kept beating the guidance early last year and decided that’s just the way the world works. We kept saying over and over again, we use the same methodology, we are very conservative, we are trying to understand what is going on in our business. We moved the guidance up very strongly the back part of last year because we had confidence in the numbers and we continue to have confidence in the numbers, and people should listen really carefully to what we say. Todd Raker - Deutsche Bank: Okay, thanks, guys.

Your next question comes from the line of Katherine Egbert. Katherine Egbert - Jefferies & Co.: Thanks. Could you tell us, J.D., exactly what did Nine Systems contribute in March? What was the actual number? J.D. Sherman: In March, we had Nine Systems for 18 days or 19 days --

Do you mean Netli or Nine Systems? Katherine Egbert - Jefferies & Co.: No, Nine Systems. J.D. Sherman: I’m sorry. Nine Systems, I was going to give you the December when we had an equivalent kind of 18, 19 days, it was about $800,000, but we are not going to break out what Nine Systems was in the March quarter. In fact, basically as I have said, our strategy there is take the Nine Systems solutions and accounts and embed them right into our business and our media and entertainment sector and basically roll the two together.

We took their existing business, which was effectively a CDN business, and moved it to our network to get the efficiencies of our network cost. Katherine Egbert - Jefferies & Co.: If I could just follow-up on Todd’s question, so this is the first quarter in six quarters you have not been over the high-end of guidance for the quarter, and I heard what you just said about, you say over and over you can’t keep beating and -- I’m just wondering; was there any disappointment for you internally in this quarter? Did anything change between the time you gave guidance in January, when presumably some of the prices on the renewals in December were set and the current time --

Let me stop you right there -- no. We always tell you exactly what we think is going to happen. We got some very pleasant surprises last year and we explained why the phenomenon that we thought was going that we then captured in our guidance going forward. We gave what we thought was accurate guidance and actually, we came in exactly there so we were very pleased. In fact, I would like to be exactly right on. I would love to give you an exact dollar, an exact penny number and then hit it because it says we then understand everything that is going on in our business. We came in near the high-end of the range. I thought it was a very strong quarter and we continue to be very optimistic about the year. Katherine Egbert - Jefferies & Co.: Okay, and then if I can, J.D., could you just dig in a little bit more; I think you alluded to the fact that you will get margin expansion more in the back-half of the year. Could you just explain that a little bit more? J.D. Sherman: Certainly as we further integrate the acquisitions, that will help because we have some initial costs associated with doing that. We have always talked about the first quarter being a little bit, having some unique expenses, and then you can see the pattern in the way we have progressed last year and the year before. Basically, the fundamental driver for us is getting more scalability, more efficiency as we grow the top line. As our guidance says, we expect to grow the top line very aggressively for the rest of the year and achieve that. Really, that’s the drivers.

That’s historically been true. We always have the payroll reset in Q1 and we always have larger sales training expenses in the first-half of the year than in the second-half of the year, and that has been consistent. And then the difference this year over the last year-and-a-half has been not just one acquisition but three to integrate, and a lot of the synergy we get out of taking down their network costs and adding our efficiency. It takes a couple of months to roll their customers onto our network and unwind their network relationships and we have to do that with both Nine Systems and Netli in the first-half of this year. Katherine Egbert - Jefferies & Co.: Do you think you have seen the bulk of the gross margin compression for this year? Meaning are we going to start to see flatter gross margins? J.D. Sherman: Again, that is something that if you go back and look at 1Q of ’06, our margins did decline a couple of points and then sort of level out for the year, so that is another pattern you see. Obviously the acquisitions affect that as well, so we are still confident in our guidance, that we should see about 3 points of gross margin decline this year and we will more than offset that with EBITDA improvements. I think you saw this quarter a couple points sequential decline but still EBITDA margins flat from 4Q and up 5 points year over year, so we are pretty pleased with the progress we are making. Katherine Egbert - Jefferies & Co.: Okay, thanks, J.D.

Your next question comes from the line of Phil Winslow. Philip Winslow - Credit Suisse: I just wanted to ask a quick question along the lines of the multi-year contracts that you talked about with the customers, some of it pressuring the gross margin side, but when you also do look at your revenue line, any effect from that that was different than you anticipated coming into the year? Or could you just step us through that? J.D. Sherman: That is a trend we have been seeing really for several quarters, that the deals keep getting bigger and bigger and we keep getting more and more aggressive with our customers. I have said for a while that the primary driver for us of price is volume and we are very happy to get aggressive when the big deals come along and give us a chance to win those deals and add a lot of value on top of those. For us, the fundamental driver is how do we scale that on the bottom line and drive bottom line profitability? I do not think we saw any major changes there. There is a bit of focus about where we came in on the guidance range, but if you look at where we came in on actual growth performance, I think it is pretty consistent with what we have been seeing in the past. Philip Winslow - Credit Suisse: Okay, great. When you do look at your leverage going forward and your model and when you start to think longer term, what do you think is a more stable gross margin range, and then I guess CapEx as a percentage of revenue? J.D. Sherman: We have not set out a target or an ultimate model there. We look at the individual deals really in terms of a bottom line profitability, but clearly as the media business grows and the large deals grow, we will be seeing some margin declines. We talked about 3 points for this year. I think that is something that we will continue to be able to offset with improvements in our overall scalability, because as we -- there is a lot of leverage in our business model, as I’ve talked about. As the revenue grows, we continue to improve our profitability, despite the fact that the gross margins have come down a little bit. Philip Winslow - Credit Suisse: Okay, great. Thanks, guys.

Your next question comes from the line of Harry Blount. Harry Blount - Lehman Brothers: This is Roberta in for Harry. I apologize if this has already been asked because I had some issues connecting but I wanted to ask, previously I know you’ve said that fiscal ’07 that the acquisitions, Nine Systems and Netli, would contribute I think $25 million to $30 million in the year. So what it be fair to look at it as a $6 million to $8 million per quarter contribution from acquisitions? J.D. Sherman: Let’s see, well, we talked about the Netli being only $500,000 in the first quarter, and obviously like the rest of our business, we hope that -- what we talked about there was kind of a run-rate. We hope that those are part of continuing to drive sequential quarterly growth, so the run-rate is probably in a roughly flat range and then hopefully, we take those customers and we up-sell them with Akamai products and services. They grow naturally. We take the solutions from Nine Systems and sell them into our existing media customers, et cetera. So I think that is part of our strategy to fuel our growth for the rest of the year.

Your next question comes from the line of Bob Stimson. Robert Stimson - WR Hambrecht: Just a couple of quick questions; given the fact that I would say the treasury method and the stock’s really appreciated well in the last 12 months, does that effect the size of the diluted share count going forward? Could you give us some help on what we should be thinking for the rest of this year in terms of share count? J.D. Sherman: Obviously the stock price goes into the treasury method. It is not a huge impact, especially since a lot of our equity compensation is based on RSUs, which has less to do with the treasury method than when you are calculating options, so it is not a huge driver. The biggest driver has been the roughly 3 million shares with each of the acquisitions that we have done and the roughly 300,000 shares with the Red Swoosh acquisition. And then we kind of have the normal growth that has been roughly 1 million shares a quarter, 1.5 million. We do not expect any major changes there. Robert Stimson - WR Hambrecht: Okay, great, and then, just on the CapEx number, I just want to follow-up with what someone said before. I think the number I saw in the financials was about $27 million for the quarter. Is that the run-rate that we are at, or do we have a little bit more incremental spending in Q1 and Q2 and we will not have as much in the back-end of the year? J.D. Sherman: Right, exactly. We do -- the $27 million is what we spent on equipment and about $4 million on top of that for cap labor, so just to tie it out, it’s about $31 million in total. That is about -- you add that up it is about 23% of revenue. Last first quarter, we did a similar kind of spend ahead and spent 21% of revenue. Based on that, that is kind of the way that we like to use our purchasing power and we still expect to be in the range of 16% for the year. Robert Stimson - WR Hambrecht: Great, and then just real quick; this is kind of a million dollar question I think people have to start focusing on a little bit. When the NOL issue, and again everyone knows what that is. I’m just trying to get a sense of if you back out that number, when do we really have to start thinking about that? Is that a 2010 event, a 2011 event? Could you just give us a sense of the timeline of that? J.D. Sherman: Well, it is certainly going to be into the next decade. We have not given a specific time when we think it is but our estimates put us into the next decade before we are a taxpayer.

Your next question comes from the line of Rad Ratliff. J.D. Sherman: Hi, Rod.

Hi, Rod. Rod Ratliff - Stanford Group: At least you guys got the name right. J.D. Sherman: We knew it wasn’t Rad Ratliff. Rod Ratliff - Stanford Group: Sweet. Guys, there was a jump in deferred revenue in the quarter. Is this germane to operations? Should we for some reason start looking at total bookings, including deferred revenue, rather than just revenue growth? J.D. Sherman: No, I mean there was a bit of a jump, there was a bit of a decline, actually, in the fourth quarter if you looked at it, and it bounced around a little bit based on some strategic deals, our customers that do prepaids, but it is not a significant driver for us. It is not something that we have in a major structure. As you know, we do some strategic custom deals, both in -- mainly in the government but some commercial deals, and a lot of times for those we defer some of the revenue until the work gets done. Rod Ratliff - Stanford Group: Paul, if you are resetting multi-year contracts, will some of them actually be coming up to more market normal rates now? Are these deals that you might have made back in the dark days of ’01 where you might have had to make a little bit more of a concession, so we might be looking at some marginal revenue coming up? Are you looking at resetting to the positive is what I am getting at.

Well, we are not resetting anything out of the ordinary at all and we certainly I do not think had any six-year deals in 2001. They were probably six-minute deals more than anything else in 2001. What we have talked about over the last several years is that the deal length has been increasing pretty much every year. I think that has continued to happen. What we are seeing is that is probably happening a little bit in the media space in addition to the enterprise space as these companies are getting more serious about their online bets and they want to bet on infrastructure, they want to use Akamai. Usually they are talking about much greater volumes and those are all I think positive trends for the business. But quarter over quarter, I don’t think there’s -- there’s nothing unusual about Q1 or Q2 in terms of what has come up or which customers. Rod Ratliff - Stanford Group: Just on the margin in terms of bursting revenue, I saw some industry data over the past couple of weeks and it looked like online software sales kind of fell off a cliff in February and March. Did anything like that -- did you see anything like that and was there any dampening of marginal bursting revenue related to a phenomenon like that?

Didn’t see that at all, don’t know where that data came from. J.D. Sherman: I don’t see it.

Nope, nothing on our radar. Rod Ratliff - Stanford Group: Great, thanks.

Your next question comes from the line of Aaron Kessler. Aaron Kessler - Piper Jaffray: A couple of questions; first, on the international media market, could you give us a sense for how far you think some of the media and entertainment category is behind the U.S. market? On the Nine Systems acquisition, any chance you could give us a sense for any revenue synergies you are starting to see between the Nine Systems and Akamai in terms of adding on additional software functions might give you some more deals on that side. Thank you.

The international market I think we have talked about, not just on the media side but probably one, two years behind development here for hosting, for outsourcing, for the normal trends. I am actually just back on a trip from Asia and there is some very exciting media stuff going on there but certainly not at the scale yet that we are seeing. I think long term, there is a lot of potential because of really the proliferation of broadband and the much larger audience potential in international markets just dwarfing the U.S. market longer term. It is why we like being in those markets and selling in country and servicing in country gives us I think a strong relationship with what those customers are doing. We are starting to see I think some strong traction with all of our digital media management functionality, both stuff that we already had and the tools from Nine Systems. We had a great launch of StreamOS at NAV. Last week, the CBS deal that was announced that we were a part of I think is very instructive of the real interest in syndication, link syndication functionality is significant and we have tried to play a leadership role there and Nine Systems will add to that capability. We are starting to see that in some deals already. Aaron Kessler - Piper Jaffray: Could you just remind us on the international revenues, is that just from companies located internationally or is that multi-national as well that you count for revenues there?

We count where the contract is written, not where the traffic is delivered. So it could be -- we will call it U.S. revenue if it is a U.S. contract, even if some of the traffic goes outside. So a higher percentage of the traffic is delivered outside than the revenue. Aaron Kessler - Piper Jaffray: Thank you.

Your next question comes from the line of Daryl Aftahi.

Hi, Darren. J.D. Sherman: It’s Darren.

Don’t feel badly. They’ve butchered every name here. We have a perfect run going. Darren Aftahi - ThinkEquity: Just a follow-up; what is your initial customer traction or reaction to your syndication product? Has that given you more of a stickiness with people in the media and entertainment sector? My second question is could you talk a little bit more specifically about how the government sector trended in the quarter and your outlook for that for the rest of the year?

Sure. The syndication capabilities, it is still very early as that market is developing. But the conversations we have had are very exciting. We are seeing some deals get done I think partly because of that, but it starts with our we believe superior ability to deliver quality with control, and that the media management tools on top of it are just an enhancement. We had a lot of exciting discussions at NAV just last week with a lot of particularly U.S. media companies migrating more and more of their business online. But that is I think a multi-year evolution. It is going to take a couple of years to see how strong those new business models are, but so far very encouraging signs. The government business continues to be a strong component of what we do. I don’t think any fundamental changes there, much longer buying cycles because of just the way the government gets around to funding initiatives, but that continues to be an important component of our business. Darren Aftahi - ThinkEquity: Just a follow-up on the syndication; does this put you competitively in a position to go after the video ASPs, or is that something that is really not core to your strategy long-term?

We probably think of a lot of those players as customers or partners. We certainly are not going to have applications that do everything that our customers want to do with video. We are also not a professional services shop. We want to add core functionality that allows our customers to control and monetize their assets that they want us often to store and always to deliver.

Your next question comes from the line of Colby Synesael. Colby Synesael - Merriman Curhan: Just real quickly on the margin, I know we have talked about it a lot. The acquisitions of Nine Systems and I guess a little bit of Netli, was that part of the reason the FD margins came down in this quarter? I guess what I am looking at is what is the gross margin difference between the core Akamai business versus some of the acquisitions you have made? I know you won’t give us that exact number but you can give us some idea if those are drastically apart or very similar. J.D. Sherman: I think clearly our core margins are better than the companies we are acquiring, and part of the synergy, as Paul referenced, and is quite clear to us is getting that traffic onto the Akamai network. That is a process that takes time as you migrate the customers, so some of the impact and therefore some of the improvement going forward comes from completing the integration of those acquisitions. Colby Synesael - Merriman Curhan: Okay, and then real quickly, you guys mentioned on the call, I think Paul, you did, when you guys were talking about expanding edge services to set-top boxes and computers. Were you guys talking about Red Swoosh or was there something else there that you guys strategically are looking at going forward?

I was talking about our own development and then Red Swoosh. Colby Synesael - Merriman Curhan: So how does that get involved with set-top boxes and actually putting that on? I guess computers from the download standpoint, but how does set-top boxes fall into that?

Well, as we look at edge devices that have IP connectivity that will be used to view and access media, the world is going to expand past the personal computer to mobile devices, what we would think of as a set-top box or effectively an IP box that will be moving entertainment content to a big screen as opposed to say a small screen, and we think that the need to control content and control the rights and who can view it but with huge capacity is going to grow over the next five years, and that by taking our massively scalable edge network and back-end controls and marrying it with the ability to do more at the client will add significant value. We already do some of that with our download manager and we are just looking to expand those capabilities over the next couple of years to meet our customers’ needs. We think one of the areas to expand it will be to move from the PC to other kinds of devices where people are going to want to consume rich media with an IP connection. Colby Synesael - Merriman Curhan: So it is actually going to be expanding out your own network, as I guess about 25,000 servers, using some type of peer-to-peer technology to combine with your traditional CDN network?

Well, part of that depends on what you mean by peer-to-peer. We are not going to launch a service that allows piracy and sharing illegally. We think of our network already in many ways as a peer network. Those servers, those tens of thousands of servers, peer with each other and connect to end users. You can think of just extending that capability to other devices over time for capacity, performance and cost savings. Colby Synesael - Merriman Curhan: Thank you.

Operator, why don’t we take one more question?

Yes, sir. Your next question comes from the line of Jennifer Adams. Jennifer, your line is open.

I think we lost her. Why don’t we move to the next?

Your next question comes from the line of Ben [Abel].

I just wanted to make sure, you guys have done in this quarter, we would have two acquisitions, the Netli and Nine, is that correct? Those would be the only ones of acquired revenue in the past year?

In our Q1 results. The Red Swoosh acquisition closed in April. J.D. Sherman: And it is not material, but also all of those were built into the guidance we gave in February for the year because we had visibility to them.

Right, and as we think about those layering out in the back-half of the year, I guess I am trying to understand the difference between this quarter where -- the organic growth was around 50% this quarter year over year, is that right? J.D. Sherman: Yes, year over year that is probably about in the ballpark, with about 3 points of help from the acquisitions.

I’m sorry, that’s --

You had full benefit of Nine Systems and you only had a little less than one month of Netli, and we broke out the Netli number so you can put a run-rate in there and project that forward.

And your full year guidance, you are continuing to assume that $25 million to $30 million from those acquisitions and the 42 to 46, so then the organic number is actually something lower. Is that right? J.D. Sherman: That’s right.

So should we think about that deceleration being something driven by ARPU or renewals or less events? How do we think about that? J.D. Sherman: Last year we did see a tremendous increase in the ARPUs. We were seeing 7%, 8% in the back-half of last year and we certainly haven’t factored in that level of ARPU growth into our guidance. I think fundamentally what we are doing is we are driving $10 million to $12 million of additional revenue on a quarterly basis and the numbers are getting larger, and that is dampening our growth rates a little bit but it is still pretty strong growth.

We are at the midpoint of the range. We are close to 45%. I would take that as a phenomenal year off of last year’s phenomenal approximately 50%, on a much larger number.

Fair enough, and the thought process on the deferred revenues is that those all roll on to the P&L at some point during the year? We are not going to exit the year building that up?

As J.D. said, it goes up and down a little bit. Some of that will roll on in the year, some of it is over a multi-year deal, but there is not really a fundamental change in that. It went down a little last quarter, it went up a little this quarter.

Fair enough. Thanks.

Thank you all. We will see you at the end of the next quarter. Bye-bye.

This concludes today’s conference call. You may now disconnect.