Paul Sagan - Chief Executive Officer, President and Executive Director J. Sherman - Chief Financial Officer, Principal Accounting Officer and Senior Vice President Noelle Faris - Senior Manager IR

David Hilal - FBR Capital Markets & Co. Derek Bingham - Goldman Sachs Group Inc. Donna Jaegers - D.A. Davidson & Co. Srinivas Anantha - Oppenheimer & Co. Inc. Chad Bartley - Pacific Crest Securities, Inc. Katherine Egbert - Jefferies & Company, Inc. Mark Kelleher - Brigantine Advisors Richard Fetyko - Merriman Curhan Ford & Co. Jeffrey Van Rhee - Craig-Hallum Capital Group LLC Kerry Rice - Wedbush Securities Inc. Randy Katz - JMP Securities Tim Klasell - Stifel, Nicolaus & Co., Inc. Michael Olson - Piper Jaffray Companies Scott Kessler - S&P Equity Research Rob Sanderson - American Technology Research Mark Mahaney - Citigroup Inc Michael Turits - Raymond James & Associates

Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Akamai Technologies Inc. Earnings Conference Call. My name is Regina, and I will be your operator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Noelle Faris, Director of Investor Relations. You may proceed.

Good afternoon, and thank you for joining Akamai's Investor Conference Call to discuss our Second Quarter 2010 Financial Results. Speaking today will be Paul Sagan, Akamai's President and Chief Executive Officer; and J.D. Sherman, Akamai's Chief Financial Officer. Before we get started, please note that today's comments include forward-looking statements, including statements regarding revenue and earnings guidance. These forward-looking statements are subject to risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied by such statements. Additional information concerning these factors is contained in Akamai's filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. The forward-looking statements included in this call represent the company's view on July 28, 2010. Akamai disclaims any obligation to update these statements to reflect future events or circumstances. As a reminder, we will be referring to some non-GAAP financial metrics during today's call. A detailed reconciliation of GAAP and non-GAAP metrics can be found under the News & Events portion of the Investor Relations section of our website. Now let me turn the call over to Paul.

Thanks, Noelle, and thank you all for joining us today. Akamai performed very well in Q2 with record revenue of $245 million. We continue to see strong demand for our services across all verticals and top line growth accelerated for the third consecutive quarter, up 20% in the same period last year. We generated fully normalized net income of $65 million or $0.34 per diluted share, that was up 18% from Q2 of last year. We have seen continued signs of traction in all of our key markets especially increasing need for cloud computing optimization services for enterprise clients. Rolling traction in a digital video being delivered in high-quality and at massive scale over the Akamai HD network and expanded interest for mobile content delivery solutions in the rapid growing market for smartphones, an area where we made an important acquisition in Q2. We're also very excited to announce today, that David Kenny will be joining our management team as President. I'll be back in a few minutes to talk more about David's appointment, as well as other important trends in the business. First, let me turn the call over to J.D. for the details on Q2. J.D.? J. Sherman: Thanks, Paul. As Paul just highlighted, our business performed very well in the second quarter. We grew revenue $5 million sequentially and 20% year-over-year to $245.3 million. Coming in at the upper end of our expected range for the quarter with solid growth in every vertical. In Media and Entertainment, we continued to see strong traffic growth building on the trend that began in the middle of last year. As a result, Media and Entertainment revenue grew by 22% from Q2 of last year and 3% from the prior quarter. In the quarter, the World Cup was a marquee event for us, demonstrating the potential of HD video over the Internet at truly impressive scale. As we have noted in the past, no single event has a significant impact on our revenue growth in a given period. And this is even truer today, as we approach $1 billion a revenue and deliver literally thousands of event, large and small, throughout the year. E-Commerce continue to demonstrate strong results as well, increasing 21% over Q2 of last year and increasing 4% compared to last quarter. This was a very solid performance in what is generally a seasonally slower quarter, driven by increasing adoption of our value-added solutions in this vertical. The high-tech vertical declined 3% from Q1 due to timing of some big software releases, but grew 8% year-to-year. We have continued to see growth with our Application Performance solutions among SaaS vendors in this vertical. And public sector was up 51% from Q2 of last year and 9% from last quarter, continuing the solid performance we've seen for the past several quarters from government contracts. We're pleased with our continued traction across our portfolio of value-added solutions. In Q2, 54% of our revenue came from value-added solutions, up from 48% in Q2 of last year. Signings in the quarter both from new customers and from existing customers that are upgrading and adding additional applications were very strong. In fact, the dollar of new customers signing for our value-added solutions was up nearly 36% from last quarter. During the second quarter, sales outside North America represented 28% of total revenue consistent with the prior quarter. International revenue grew 2% sequentially and 20% year-over-year despite the currency headwind. The sharp strengthening of the dollar had a negative sequential impact of about $3.5 million, and on a year-over-year basis, the currency impact was negative by just under $1 million. The currency impact ended up being about $2 million worse than we assumed back in April when we gave our revenue guidance. Excluding the impact of currency, international revenue grew 7% sequentially and about 20% on a year-over-year basis. Revenue from North America also grew 20% year-over-year and was up 2% sequentially, and resellers represented 19% of total revenue, up a point from the prior quarter. As expected, cash gross margin of 82% was down a point from the 83% level we achieved last quarter but was up roughly a point from the same period last year. GAAP gross margin, which includes both depreciation and stock-based compensation was 71% for the quarter, also down a point from the prior quarter. But consistent with Q2 of last year. GAAP operating expenses were $116.6 million in the second quarter. These GAAP numbers included depreciation, amortization of intangible assets, stock-based compensation and restructuring charges. Excluding non-cash charges, our operating expenses for the quarter were $88.6 million, up $8.5 million from Q1 and up 28% on a year-over-year basis as we continue to invest in the business. This included one month of operating expenses from our acquisition of Velocitude, which closed in June. Adjusted EBITDA for the second quarter was $112.1 million. That's up 15% from the same period last year and down 5% from Q1 level. Our adjusted EBITDA margin came in at about 46% as expected even with the acquisition, down about two points from the same period last year and down three points from the prior quarter. For the second quarter, total depreciation and amortization was $34.7 million. These charges include $26.5 million of network-related depreciation, $4 million of G&A depreciation and $4.2 million of amortization of intangible assets. Net interest income for the second quarter was $2.8 million, up slightly from first quarter level and down $700,000 from Q2 of last year despite a higher cash balance due to lower interest rates on our investments. Moving on to earnings, GAAP net income for the quarter was $38.1 million or $0.20 of earnings per diluted share. As a reminder, our GAAP net income include several primarily non-cash items, including $22.1 million of stock-based compensation, including amortization of capitalized equity-based compensation and $4.2 million of amortization of acquired intangible assets. As a reminder, beginning this year, we are including GAAP taxes when we report our normalized earnings each quarter, although, they are primarily non-cash. For Q2, that tax charge was $21.3 million. The supplemental metric sheet posted in the Investor Relations section of our website provides a historical view our normalized EPS on a fully taxed basis for comparison purposes. Based on this methodology, our fully taxed, normalized net income for the second quarter was $65 million, up 18% from Q2 of last year and down 1% from Q1. In the second quarter, we earned $0.34 per diluted share on a fully taxed normalized basis, coming in at the top end of our guidance range. That's up $0.05 from Q2 of 2009 and down $0.01 from Q1 of this year. Our weighted average diluted share count for the second quarter was 190.5 million shares. Cash generation continued to be very strong. Cash from operations for the second quarter was $86.4 million and year-to-date, we have generated $174.1 million of cash from operations or 36% of revenue. At the end of Q2, we had $1.1 billion in cash, cash equivalents and marketable securities on the balance sheet. This balance included $178 million of highly rated, federally insured student loan auction rate securities. This amount is down from the prior quarter as we had about $68 million of these bonds redeemed at par during Q2. In addition, we exercised our right to sell back an additional $30 million of our portfolio at par to one of our money managers on July 1, a change that will be reflected in our balance sheet in Q3 and after that transaction, we'll be left with $151 million in federally insured student loan auction rate securities. Also during the quarter, $136 million of our convertible bonds were converted into 8.8 million shares of stock, leaving the convertible bond balance at $64 million as of the end of Q2. These shares were, of course, already included in our diluted share calculations, so there is no impact to our fully diluted earnings per share numbers as a result. Capital expenditures, excluding equity compensation were $66.1 million as we continue to build out our network to capture the accelerating volume growth we expect to see, as well as increase our investments and capitalize software development. During the quarter, we spent $20.4 million in share repurchases buying back about 537,000 shares at an average price of just over $38. Since the beginning of our share repurchase program last year, we have spent $108.6 million buying back a total of 4.7 million shares at an average price of $23. And finally, our days sales outstanding for the quarter was 58 days, consistent with Q1. We're very pleased with how our business has performed through the first half of the year, and with 20% topline growth in Q2, we're confident that we will achieve our goal of $1 billion in revenue for the year. And while there's still some caution about the macroeconomic environment, we've seen some very positive trends that we think bode well for our near-term and long-term prospects. We see significant opportunity across all of our verticals, and we're making substantial investments both internally and externally to catch this opportunity. Our recent $15 million cash acquisition of Velocitude is a great example of our investment for the future, with this investment focused on the mobile opportunities. We expect that the acquisition will be roughly neutral through our earnings over the next 12 to 18 months. But over the near term, our expenses will exceed revenues from the acquisition, which we expect to be less than $1 million for the year. For the near term, we're expecting Q3 revenue of $242 million to $252 million. At the midpoint of this range, that translates to 20% year-over-year growth. Remember that we have traditionally seen slower traffic growth in the mid-summer months as people head outdoor. Assuming current spot rates, foreign exchange will have a negative impact of approximately $2 million on a year-over-year basis in Q3. So excluding the impact of currency, the midpoint of our revenue guidance implies revenue growth of about 21%. We expect that cash gross margin will continue to be in the range of 81% to 82% in Q3, down slightly from Q2, driven by Media growth, but still within the range of the last two to three years. We believe GAAP gross margins, including equity compensation to be approximately 69% in Q3 due to investment in the network. We expect operating expenses in Q3 to grow modestly from Q2 levels and we expect adjusted EBITDA margins to be in the range of 44% to 45% for the quarter, slightly below our long-term model, driven by the investments we're making, which we think can drive significant growth for the future. And after a large investment in Q2, we expect capital expenditures, excluding equity compensation to decline about $40 million in Q3. For the full year on CapEx, we're tracking to about 17% of revenue for CapEx. This slightly higher than our long-term model, driven by the strength we see in terms of volumes growth, as well as the increased investment in capitalized software development. We plan to continue to add engineers focused on our value-added solutions. Given our revenue guidance of $242 million to $252 million in Q3, we expect fully taxed normalized earnings per share for the third quarter to be in the range of $0.32 to $0.34, including the impact of Velocitude. As a midpoint, that's up 18% year-over-year. This assumes a full-year GAAP tax rate of roughly 35% to 36% or GAAP taxes of approximately $18 million to $22 million for Q3. Overall, we've had a very solid first half and we expect strong performance through the second half of the year as well. We see promising momentum across the business and we're making investments that we believe can drive meaningful growth for Akamai beyond 2010. Now let me turn the call back over to Paul.

Thanks, J.D. As J.D. just detailed, we had a very strong first half. Looking ahead, we continue to see proof points for the three major trends that support our growth strategy and we're aggressively positioning the company to benefit from these trends. In cloud computing, as more and more companies move to the cloud experience new performance and reliability challenges that are inherent in using the Internet. To address these challenges, we're partnering with companies big and small to make the cloud work better. One such partnership, for example, is the Akamai Ready Initiative that IBM announced at the Impact Conference in May. By pre-tuning IBM WebSphere products to leverage Akamai technology, customers can see significant benefits for their enterprise applications delivered over the Internet. These benefits include not only improved performance, but also reduced capital expenditures and faster time to integration. In Media, online video is creating real business opportunities for customers as we have continued to serve increasingly large online audiences and set records for peak traffic every quarter, there's little doubt that the migration online is happening at an accelerated pace. Highly publicized World Cup was just one example. BBC estimated that 5% of its World Cup audience watched online. It's an incredible statistics. We've talked about being at the 1% line for online video for a while, and now we're seeing events like the World Cup surpass that mark by a wide margin to reach ever larger Internet audience. During the World Cup, we successfully delivered live and online demand content for 24 different global broadcasters into 65 countries. And in most cases, these clients were leveraging the Akamai HD network less than a year after we introduced it. And for online advertising, we've continued to see encouraging signs of traction. A key differentiator for our Advertising Decision solutions is the ability to launch targeted ad campaigns for clients without using pixels. This unique Akamai capability enables our clients' larger campaign to come to market faster and without draining their IT resources. Already in Q2, 20% of the revenue for our Advertising Decision solutions was on our pixel-free platform introduced just last year. In addition to these three trends that we've talked about for a while, cloud computing, HD video online and better targeted online advertising, we believe that one of the most exciting future opportunities for Akamai is delivering content and applications to Internet-enabled mobile devices. These devices are expected to outnumber traditional PCs in just three years. This trend is part of the reason behind our recent acquisition of Velocitude, where technology help businesses adapt and optimize their Web content for delivery to mobile devices. Many online businesses are embracing the mobile channel to reach customers prospects, partners and employees, creating a need for easy-to-navigate mobile websites. We built a great business optimizing Internet content and applications access over personal computers. We believe that mobile will be an important part of the Internet's growth and is a natural extension of our product portfolio. Now with solid performance from our entire team, we've got the $1 billion revenue objective firmly in our sight and I expect to get there this year. But we're even more excited about the future opportunities for Akamai beyond 2010. And we're very pleased to be announcing today, that we're adding David Kenney to our experienced and successful management team as President to help us drive the next wave of growth here. As many of you know, David is not new to Akamai. He's been a member of our board since 2007, he knows our industry, our business, our technology, our people and most importantly, our customers. He's one of the most respected, enabled executives in the online world. David's a great fit for Akamai, and I look forward to partnering with him for years to come. Now J.D. and I would like to take your questions. Operator, the first question please.

[Operator Instructions] Your first question comes from the line of Michael Turits with Raymond James. Michael Turits - Raymond James & Associates: First, you talked about investments that you're making that will impact both the GAAP gross margin, which I assume that flowed through on the basis of depreciation, maybe we could be more specific about that, and will also have an impact on EBITDA. So maybe you could be more specific about those investments. What they are and how they impact OpEx, and then I have a follow-up.

Why don't you give us both, Michael? So we'll have it in case we lose you. Michael Turits - Raymond James & Associates: The other question is, the thing I'm most curious about, which is the rate of growth in customers consumption of bandwidth, whether that seems to be -- where that is relative to say, a trough we might have hit a year or two ago and peaks that we might have hit several years ago for the first time to re-accelerate or not.

So let me talk about the kind of products that we're working on, investing in, across the business. And then I'll let J.D. take the impact on our performance and rate of consumption on the network. So I think if we focus on the areas that we believe are the key trends, the investments and the buildout, aside from the pure Network buildout for capacity and performance in increasing parts of the world, is around the features and functionality that make our services more valuable to our customers. So if you look at media online, if you look at HD, it's all about saying to the customer, this is a very complex world. You have users everywhere across three screen sizes and many, many kinds of devices and you're trying to deliver them an optimal and economic experience. And so the idea would be evolution of the Akamai HD network is deliver a high-quality HD picture at any device with the simplest input. So today, customers have lots of formats, lots of bit rates and lots of effectively a spaghetti mess. And we're trying to move them to role that says you can deliver us a file in any format and then we will figure out where the user is, what kind of device, what access capability and deliver them that experience and then give you full data back on what happened. So the investment there is around ease-of-use for our customers and managing the complexity for them inside the Akamai HD network with the TV-quality picture with whatever level of interactivity they want to build into the player, whether that player is on a mobile device, on a PC, or on a big screen. Across the value-added services, you really have to look at the industry. In commerce, it's around increasing the value to commerce. So, for example, around security like the web app firewall functionality that we rolled out or the new service around tokenization to help shield and protect credit card numbers, all areas of engineering investment, this is effectively software we deploy and then make available to our customers. Mobile is another, where we made the acquisition in Velocitude and will work to build out and enhance their technology for transforming standard websites across mobile devices. So those are the kinds of investments that we're making. Let me turn to J.D. to pick up the impact in the shorter and the long-term and the question of usage of network. J. Sherman: Right, and I was also add on the investment side, that you'll see us making a lot of investments in our go-to-market. That's where most of the new headcount is going in our sales and services and support organizations, particularly as we go into new verticals. That's going to be an important investment. And I think, it's one that we're already starting to see pay off with our traction in places like financial services and healthcare. And then of course, Michael, on the GAAP gross profit question, that's obviously the timing of when we put servers on and then traffic grows over time. So a little bit of that as we have a very big CapEx quarter in Q2. Then to your question on the traffic, we've seen the Media and Entertainment vertical go from this time last year, shrinking almost 10%, to now growing over 20%. Over that period of time, pricing has been relatively constant. I mean, we actually have seen, for a period of time, a little bit more aggressive price and I think we've seen that sort of stabilize a little bit. The key thing is the rate of volume growth has continued to accelerate and our bet is that, that continues with HD over a long period of time. And that's what we're trying to make sure we stay in front of.

Your next question comes from the line of Mark Kelleher with Brigantine Advisors. Mark Kelleher - Brigantine Advisors: I wanted to talk about some of your international investments. Can you maybe break out what you see as an opportunity in EMEA versus Asia? And do you expect that the international might grow faster than the domestic? This quarter seemed to be at the same rate. And are there any differences in the vertical market concentration in those foreign markets?

Sure. Well I always had been cautious to generalize, people tend to talk about Europe like it's one country, it's many countries. It's not a bunch of states as we tend to obviously, think about the U.S. So we need to be very careful that their markets have their dynamic. And I think if you look at the growth, you have to also remember that currency headwind was even more severe. So the growth there if you normalize there was on par with the rest of the business. And we continue to believe that there is more opportunity. There's just more people on the Internet and in many places, with better broadband. I would recommend you look at our State of the Internet report offline that came out earlier in the week, and you'll see that broadband access and growth, fastest cities in the world, most of them are not in North America, as it turns out. So we see opportunity there and uptake across the board, strong uptake for our Application Acceleration services. Particularly there are global companies all around the world where -- and they're trying to reach their partners, prospects, customer, suppliers around the world. They use our Application Acceleration services to improve a business process and raise that affection with their customers for what they do. At the same time, there is our traditional media and video delivery and we were doing HD of the World Cup for, as I said, several dozen broadcasters. There were only I think two, with the right -- in the U.S., the rest were elsewhere. So they were in-country broadcasters with those local rights, or rights in a couple of geographies. And they were using the HD network like never before. So I wouldn't say it's all in the volumes side, it's value-added side. It's both. We're doing very well in Asia and in many places in Europe. I think in the macro sense, we're probably a little more concerned with the economy in Europe for all the widely known reasons. And I think that slowed things down, but not dramatically. But it gives us certainly, some pause and some worry. We will continue to invest most of that investment internationally in opening or expanding regions. And then localizing products, often that's really a language question. Sometimes it's a customization of the product a little bit as well, to sell it.

Your next question comes from the line of Mark Mahaney with Citi. Mark Mahaney - Citigroup Inc: J.D., you mentioned a little data point there about the dollars of new customer signings for VAS or something like that, 36% quarter-to-quarter. I want to make sure I heard that right. Could you put some context around that? What that was like in previous quarters that obviously shows very dramatic growth. But was that over a lengthy period of time? Is there a particular reason why that isn't as dramatic as it sounds? J. Sherman: No, I think we've seen pretty steady growth there. And I think we had a very solid signings quarter, with new customers, and particularly with the value-added solutions there, that drives revenue out in the future. I don't expect that every quarter we'll grow that 36%. That would be nice, but I think that was a real strong data point this quarter, which is why I shared it.

Your next question comes from the line of Egbert Cochran (sic) [Katherine Egbert] with Jefferies. Katherine Egbert - Jefferies & Company, Inc.: You did call out the World Cup, J.D. and you said it was immaterial, but can you just, since you called it out, can you just tell us -- I know it's not material, but what effect that these one-time events have for you? And what do they actually mean in terms of traffic or revenue, or any color you can give us? J. Sherman: I think what they mean is, we've seen this over and over with the large events, which is we hit new traffic peaks and then within three to six months, those peaks are normal peaks. So I think they're sort of the chance for consumers to have a new and different experience on the Internet and then start to demand more of that kind of experience. So we love those events in terms of what they mean for the future traffic. So when we thought about building out our capacity for this quarter, we knew that we want to make sure we have plenty of capacity for the World Cup and we knew that very rapidly we would grow into that capacity. So again, events are very interesting, and I think helpful for driving traffic, but they're short-term. What matters for overall growth of our business and growth of usage on the Internet is sustained usage over a long period of time. And that's what drives revenue, not necessarily these individual events. Katherine Egbert - Jefferies & Company, Inc.: Is the reason that they don't contribute is because they're kind of flat fee, or there's no possible overuse, or they're part of a broader contract? I mean, why don't we see a little bit of revenue?

Kathy, this is Paul. You do, it's just that we seem to have one every quarter. So it's just a normal part of business and no one is just so much bigger than any other. And we go from Super Bowl to March Madness, to World Cup to the Olympics, to the Elections, and there are just a few in every quarter, and so they're just kind of regular part of what we do. Certainly, there is some overuse but they just sort of roughly balance out. J. Sherman: And another comment on that, the World Cup, as you know, is a June and July event. And so some of it's in our June quarter and some of it's in our July quarter. So it even spreads it out more. Katherine Egbert - Jefferies & Company, Inc.: What assumption are you using for the euro on exchange rates in September? J. Sherman: The stats that I gave where we think the euro will be are the foreign exchange will be about $2 million, $2.5 million year-over-year headwind. That assumes a spot as of yesterday.

Your next question comes from the line of David Hilal with FBR. David Hilal - FBR Capital Markets & Co.: I wanted to go a little bit deeper on gross margin. It's up year-over-year, which is good. Sequentially down I think as expected, but because value-added services were so strong in the quarter, I would have thought that maybe that would have offset some of the gross margin decline, and I'm thinking about that right? Maybe you could just share why that wasn't the case this quarter? J. Sherman: Yes, I think last quarter was sort of an exceptional quarter in terms of gross margin. The percentage of our business that is value-added solutions, actually it was about flat quarter-over-quarter. We had such a strong growth in our Media business. So in fact, the mix change there was pretty -- there wasn't much of a mix change form Q1 to Q2. David Hilal - FBR Capital Markets & Co.: Let me ask about new customers. Obviously, a big number, the biggest in quite a while as I look back. But maybe you can share a little bit the composition of those customers, obviously, ARPU was down because of that, but maybe you can just share maybe where there was particular strength either product wise or vertical, but what contributed to the large... J. Sherman: Yes, definitely. I mean, it's ironic that at the end of last year, we said, we're not really going to talk about new customers emphasized it on the call because it has less meaning as we really diversify. And then of course, we have two unbelievable quarters in terms of new customer adds. But I think the important thing when we think about new customers is, how many new customer are we signing in new industries where we're selling our value-added solutions really driving into new revenue opportunities. And now it's a very strong quarter in terms of the focus on the value-added solutions. And of course, that's going to bring down the ARPU for the business. So there's always, when you're talking about this a double-edged sword. But we felt very positive about the traction we saw in the field. David Hilal - FBR Capital Markets & Co.: On the Commerce business, this has been able to grow at a faster clip than general online commerce transactions. I think as people have been refreshing their stores and putting more multimedia out there, et cetera. But when does it get to the point where maybe that refreshes caught ups, then you would expect your Commerce business to track with a higher correlation to just general Online Commerce business?

Well, I think, this is Paul. I'll take that. One, the Commerce market just keeps expanding. So if some numbers of years ago, we can target the top 50 then the top 100, now we can target the IR top 300. We can now go to the other parts of the world. That's one thing, the market, I think the addressable market for us is expanding rapidly. The other is we keep adding services. You talked about some of them what you think about service mitigation, you think Web App Firewall, now you think about the tokenization opportunity, bringing the mobile to them, going to those customers with our ADS Solutions, saying, how about if we also target and find in-market shoppers for your product that you're not selling. So we have an expanding portfolio and the ability to go back to them, existing ones, and try to get more wallet share and expand as they grew online whether they're pure online retailers or commerce sites or people who are bricks and clicks, and trying to shift more of their business online from the physical world. So I don't know that, that actually have a slow kind of a commonality with the rest of the business.

Your next question comes from the line of Rob Sanderson with ABR Investment Strategy. Rob Sanderson - American Technology Research: Question on the high-tech vertical, just the deceleration you saw there, sequential, that's been driven by the cloud computing, I think J.D. mentioned APS for SaaS, but is the volume side of that business really falling off quite a bit or what's going on there? And you also mentioned some timing of software releases, how might that trend in Q3 and Q4? J. Sherman: Yes, so basically there are two moving parts in that. One is very large Software Delivery business, which we have a great market position in. And therefore, the timing of rollouts of new software from our customers are going to move that around on a quarterly basis. Underneath that, we're also tracking how we're doing with APS in that vertical, particularly with the software and services guys as I mentioned last quarter. We now have a base of over 100 Software-as-a-Service companies using our Application Performance Solutions, and we continue to have good traction there. But yes, you're going to have those two parts, those two moving parts. As far as going forward, those will be the dynamics. I think we'll continue to see good growth with Software-as-a-Service, and you'll have a little bit more ups and downs in the Software Delivery space, but we don't give specific guidance by our verticals.

The next question comes from the line of Scott Kessler with Standard & Poor's Equity. Scott Kessler - S&P Equity Research: I wanted to know a little bit about when we should expect, it was highlighted, for example, I think, J.D. you referenced financial services and healthcare being two verticals that you guys are targeting. When do you think those areas, or other verticals might join the spreadsheet in terms of revenue by vertical breakout? Is it next year? Is it a couple of years out? And in addition to that, obviously, you guys are in investment mode. You've made, from what I can count, at least three pretty high-profile executive hires over the last, say, month and a half or so. And I'm wondering how long you expect this kind of aggressive investment mode to continue? So I guess two timing related questions but you get just what I'm trying to get at.

Sure. We did see opportunity and the need to speak more and more to the customers at scale in their language. So today, we already have more than half of the top global banks on our platform at one level or another what I think much more opportunity to go in and offer much greater benefit to them for obviously more revenue to us. And I think half of the online major -- the top 10 online brokerages at a similar fashion. So I think we are really penetrating, they're extremely effectively and most of that is within the last year and a half or two years, which frankly was a devastating time in their business, overall, and what they did is make an investment in online. So I'm very pleased with that. You're right to note that we've made a number of great hires. I think it says a few things, one, we are building for scale, we're approaching the goal of being a-billion-dollar business. We'll be one of five companies in technology that's tripled their revenue over in the last five years. And that puts us in some pretty rare company among global technology company. And we're preparing to scale beyond that, and I think it's a great testament to the opportunity, the level of people that we brought back into the company, whether it's bringing in somebody of David Kenny's experience as President, or Chuck Neerdaels as VP of Cloud Engineering. These are really, really top-notch executives who could really have their pick of anywhere they want to work and they're picking Akamai, and I think it's a great statement about confidence of the outside world has about our potential. J. Sherman: And just to answer your question specifically, Scott, on the breakout, you remember, we broke that out at our last Investor Day. We split the Commerce vertical into sort of B to C Online Commerce and B to B which would be the catch up for all the other enterprises. We'll do that again this year, and then we'll look going forward when it make sense in the size as they get to be meaningfully enough sizes in and out themselves a break in and out further.

Your next question comes from the line of Kerry Rice with Wedbush Securities. Kerry Rice - Wedbush Securities Inc.: Related back to the Application Performance Services, as you, J.D. mentioned that you broke it out between B to C, B to B, at the Analyst Day, could you also, I don't know if you -- I don't remember you doing this, but any kind of the margin profile for that business? Is that the same -- should we think about of it as the same as kind of the corporate, overall, as a little bit higher, a little bit lower? I'll just say my few questions on how the Advertising Decision Solutions are tracking? And then finally, the growth that we saw in the media and entertainment, how much of that traffic, and I think you did at least mentioned this somewhat, how much of that traffic growth was on the HD Network versus kind of the, I don't know what you call older network, but the other network maybe?

Well, this is Paul. Let me take the last two and I will let J.D. take the APS question. So we had growth in video across the board, including if you will, traditional format in the HD Network. Probably the bigger piece was on the HD Network. I don't have an exact stat, but I'm just guessing based on the adoption for World Cup, for example.... Kerry Rice - Wedbush Securities Inc.: Certainly, it was Infinity year-over-year. I don't think...

On the HD Network, it was Infinity, exactly. On ADS, good growth there, but that's an end of your seasonal business. So that's a Q3, Q4 question when we really see how that's done. But the uptake on the pixel-free, which is a unique platform has been great, and we think that, that is tremendous benefit because if customers like that, they can't buy it anywhere else, and that gives us a great advantage. We're saving their money when they use it. And I let J.D. talk to the APS question. J. Sherman: Yes, we did break that out. And the point we made was if you look at the Commerce and the Enterprise vertical, which are 70%, 80% of the revenue from those verticals comes for our value-added solutions. Those solutions basically leverage a massive scale platform we built on the media side, and have software like gross margins, high-80s, even low-90s. And that drops to the bottom line so you end up having higher overall operating margin. The Media business is still a very profitable business because although it has lower margins, gross margin, it scales very well. Scales like it has a network effect to it, but we really have two almost separate side of the coin there.

Your next question comes from the line of Tim Klasell with Stifel, Nicolaus. Tim Klasell - Stifel, Nicolaus & Co., Inc.: The Advertising Solutions and Decision-Support stuff due relative to the other value-added services?

It did fine. Again, as I said, that's really a Q3 Q4 business. It's a back-to-school and then Shopping business, primarily because it's about finding in-market shoppers and that's when most of those budgets get spent disproportionately. But it performed as we expected and we saw, as I said, strong traction in the new technology we offered, which we think is really a benefit to customers as they begin to see how much faster they can bring campaigns online and do it with fewer resources.

And your next question comes from the line of Srinivas Anantha with Oppenheimer. Srinivas Anantha - Oppenheimer & Co. Inc.: J.D. or Paul, we saw a big uptick in the number of added [ph] are you guys potentially ramping here for some demand that you're expecting in the second half and later part of 2011? And Paul, you also talked about strong demand from the Enterprise vertical. If you were to look out over the next three to five years, what do you think is the biggest opportunity here for Akamai? Is it in more on the medium-term front or more on the enterprise front as we begin to see cloud computing begins to gain traction?

So on the service side, it just the continue build out as we see demand and opportunities, some of it was to make sure that we are ready for the World Cup. And some of it, as J.D. said, whatever our peak is suddenly is the new average, not that far down the road and we just expect increasing delivery of rich media long form like movies online, television shows online, special events and increasingly using the Akamai HD Network. In terms of our enhanced [ph] opportunities over the next three years, I think that they're going to be equally-balanced between the media opportunity with the explosion of video that could come. We've talked about the 1% opportunity over and over again, 1% of video in the home being over IP, took 15 years to get to that point. I know it will double more rapidly and double again even more rapidly. I'm just very confident of that. We're positioned to capture value from that. And on the cloud optimization side, we continue to see expansion of people using Infrastructure-as-a-Service, Platform-as-a-Service and Software-as-a-Service. And effectively, we're then providing network optimization as a service in all three of those layers. And we continue to see increasing inquiry demand from individual SaaS players to giant Infrastructure players trying to make that Infrastructure-as-a-Service actually work for their end users. And I think that, that's just a tremendous opportunity going forward because we have this unique footprint of service around the world. The ability to route between any two endpoints in realtime to pick the best route, route around congestion, and do it much, much more efficiently than any dedicated network infrastructure you'd ever put in. And frankly, for Infrastructure or SaaS, Software-as-a-Service, dedicating infrastructure makes no sense because it's about the thing that any user you can come here without telling me where you are in advance across any device. And so I think our opportunity to optimize and build the business there is fantastic. So I wouldn't pick either. I think they're both very, very strong legs to support our growth long-term.

Your next question comes from the line of Sameet Sinha with JMP Securities. Randy Katz - JMP Securities: This Randy Katz calling in for Sameet. Just a another question on the Advertising Decision Solutions, can you talk about -- give us an update on what the uptake is like within the Media and Entertainment segment versus Commerce and perhaps speak to what growth perhaps you're seeing between those two segments? Second question would be as it related to the Media and Entertainment segment, obviously, price compression with the norm in that industry. And ultimately, to really see the next leg of growth, we had to see some discount, given just the dramatic increase in traffic to make the economics work for some of your content partners. So as we look at some of your value-added solutions, do you see any road blocks down the line that perhaps you would need to move out of the way whether it'd be pricing, regulation, side of customers to help continue to seeing rate of growth you're seeing there as well.

I'll let J.D. do the M&E pricing on value-add. On the ADS, just to be clear, the service we're offering today is a data call from online shopping. So it works the target in-market shoppers for Commerce sites. So today, it's an offer, two to buy side to go find customers online. So it's not directed to Media and Entertainment side. We're certainly interested in expanding the portfolio of products, and expect two over the coming years. But today, it's an offer two Commerce sites, so that the place it gets applied. And I'll let J.D. respond to the M&E pricing question, and we'll try to move quickly to the last few questions to make sure we get everyone in before the hour is over. J. Sherman: Yes, I think the one thing you hit on Randy, which is important. I think we're starting to see in the marketplace is you asked the question, customers have to be able to make money on this, and we are starting to see that rollover, if you will. And start to see some profitable models and customers starting to, really, this has become an integral part of their business, and I think that's been really important in the evolution of our Media and Entertainment growth. You obviously have the demand from end consumers, but now we see our customers pushing aggressively to meet that demand. I think that's really important. And I think the second part of your question was something about if there are any regulatory hurdles or anything like that? I'm not aware of any.

Your next question comes from the line of Jeff Van Rhee with Craig-Hallum. Jeffrey Van Rhee - Craig-Hallum Capital Group LLC: J.D., could you just give us some more color, the expense line, specifically, the S&M line. Revs are up $5 million, expenses are $5.4 million, sequentially, can you quantify what you did there? Who you hired? How many heads were? J. Sherman: Yes, we are hiring rapidly there. And really it's across-the-board because what we're trying to do is build out the capability to address a lot of new Enterprise verticals. We have enterprise class focused sales force, and when you're doing that, you have to build out services, support and the capabilities that these customers need to be comfortable with their -- because what we're starting to do here is bring on customers at their mission-critical businesses online. And in addition to that, we're building that out, particularly internationally. Where internationally in the past, we've been largely geographically-focused because we haven't got the scale there. We're quickly getting to scale because we think the opportunity to go through the banks in Europe, the banks in Asia, for example, is enormous. So we'll continue to build out that capability. Jeffrey Van Rhee - Craig-Hallum Capital Group LLC: On the CapEx, although a minor tweak, I believe in last quarterly call, the ranges 14 to 16, and you're now talking 17 at the margin. What gave you be the increased confidence to invest incremental dollars? J. Sherman: Well, I just think we continue to see traction on the volumes. There's no sign that, that's going to slow down. In fact, even when we start to talk about this in Q4, we said, we don't want to let one point make a trend. And then in Q1, we said, we don't want two points to make a trend. Well, we're starting to see a trend here on that. The other aspect that I emphasized in my opening remarks, which I want to re-emphasize here is, we're also investing in R&D. And as we roll out new services, we capitalize the software development for that, and that's adding to our capital expenditures as well.

I do think, J.D., that we're hearing from the media customers that they're going to start making bets on video that we're significantly different than they were talking about a year ago. I was talking to one of the largest broadcasters in the world, and they just said that the experience with the World Cup changed their view of the Internet as part of their business going forward forever. And not just a number in size of the audience is online, but how people are also using their computers and accessing this broadcaster site, while they were watching TV at the same time, allowed them to create monetization model, usage model that were new. So I think we're just going to be ready for what we think is going to be new expectations for video and data online in these markets.

Your next question comes from the line of Richard Fetyko with Merriman and Company [Merriman Curhan Ford & Co.]. Richard Fetyko - Merriman Curhan Ford & Co.: With the M&E now up 20% growth in that business accelerated, just curious if you think you're growing in line with the market or taking market share in this segment. And then curious about the impact of smartphones and tablets and other mobile devices, as well as other Internet-connected devices like game boxes. What sort of can you discern with sort of impacted those are having on your growth?

Sure. So I think on share, I think, I don't have an exact number. We leave shares to the outsiders to try to estimate. But I think we have done great in our conversations with customers, for example, with the HD Network. It's not a stream as a stream as a stream. They understand that this is a different offer that they cannot get this quality in the scale anywhere else, and that really, really matters and is really important. And then on a smartphone and the smart devices, lots of interest to delivery of video and applications there. We're so excited about it, we made a technology acquisition with Velocitude to help our customers more and more conversations about the potential and the reality of mobile and we think that's a long-term driver. Today, it's not a large driver of bit because obviously the bandwidth to that device is small and there are more people still accessing on the traditional computer or the big screen through unattached gaming type box with smartphones are a big driver. You did mention those gaming devices and you may have heard me in the past refer to them as really the Trojan horse in the home that connected the TV to the Internet. And what we found was because suddenly tons of millions of TVs, big screen TVs were connected to the Internet for reasons of gaming, suddenly the Movie business online the Internet started to take off and we see big traffic there. So that was the first way people connected to the Internet in a new way on the big screen, and the smartphone is now the way they're doing it on a small screen. So this world that we've talked about for a long time on the three screen option is really now the reality for many of our customers, and they're turning to us for optimized solutions.

Your next question comes from the line of Donna Jaegers with D.A. Davidson. Donna Jaegers - D.A. Davidson & Co.: Just to add on to that, can you talk a little bit more about your mobile capabilities? You already had good capabilities for the iPhone, now you've added in Velocitude, what else do you need to flesh out you're mobile capabilities? Do you want to do mobile ads streaming?

Well, we today, delivered content, including streaming including ads to devices. What we want to do is offer solutions that our customers find the most useful whether they are a sight trying to deliver entertainment or commerce, or frankly whether it's on mobile network partner that's looking for help, scaling their network and dealing with this crush of new data traffic, mostly video, that's clogging their networks. We're trying to work with many of them around the world to effectively optimize the infrastructure that they have. So their end users have a better experience across these devices. So we think there are a number of opportunities to partner in the cell services. We'll continue to do our own organic engineering on top of what we've had on video side and now the transformation side with Velocitude. I think we're building a pretty robust and full set of services. So I don't envision that we need to do any more acquisitions there at this point. We'll continue to build and work with our customers to see what they need.

Your next question comes from the line of Mike Olson with Piper Jaffray. Michael Olson - Piper Jaffray Companies: Just two quick number question, the stat that you've shared in the last few calls, as a percentage of customers using at least one value-added services do you have that number for the June quarter? And then also, what do you expect will be the normalized tax rate for Q3 and for the year? J. Sherman: Yes, I think we talked about the tax rate which is our full-year projection at this point and a 35% to 36% range. And then on that number, I think it's right around 77%. So more than 3/4 of our customers are using at least one value-added solution.

Your next question comes from the line of Derek Bingham with Goldman Sachs. Derek Bingham - Goldman Sachs Group Inc.: Just kind of make sure I was clear on the cash gross margin question. It's been out taking for several quarters in a row, and I think a big driver of that was value-added services mix, the mix was about the same, right? Quarter-over-quarter, but it down ticked. So was there another factor there that I didn't pick up? J. Sherman: I really think it's just a matter that we had an incredible gross margin quarter in Q1, and there's going to be small dynamics in and out in our costs and revenue and customer mix in between quarters. So I think it's more of the fact that 83% was the highest we've had for probably three years when we hit Q1. So the fact is that it was up year-over-year, we're pretty pleased with that. Derek Bingham - Goldman Sachs Group Inc.: Just on the Velocitude, I mean, any sense for kind of -- is there any significant contribution of the top line near-term and any significant dilution as well in terms of your back-half expense outlook? J. Sherman: Yes. We think sort of a 12- to 18-month period, it will be roughly neutral in terms of the bottom line. I think that its a very early-stage company with a few marquee customers, but not driving a lot of revenue. It should be about a little less than $1 million revenues in the back half. But it will be -- at the current run rate, we're looking at sort of the $3 million of OpEx in the back half of the year. And I think important that important investment that we're frankly going to accelerate because we think the opportunity next year to grow the revenue in this space is pretty awesome.

Your final question comes from the line of Chad Bartley with Pacific Crest. Chad Bartley - Pacific Crest Securities, Inc.: Question on the quarter's CDN segment that non-value-added services piece, I think this is the sixth straight quarter where we saw year-over-year declines. Can you talk about, I guess, stable pricing pressure, accelerating traffic growth and I assume that the churn continues to ease. So why isn't that business, or why isn't that revenue segment growing? J. Sherman: I think the media part of that segment is growing, but the part that's sort of traditional delivery is not growing. And so as a result, overall business is relatively flat.

On a bunch of those customers have transitioned to value-added services. So they've gone from static delivery to value-added dynamic sites. So they didn't go away. They've bought a higher value service and actually are doing more on our platform than they probably were two years ago. So we've migrated them strategically from something that had closer to a commodity substitute to something that's much more differentiated in the market in value. J. Sherman: And we're probably still doing their commodity, if you will, delivery, put within that lower cost.

And that's loss in the overall deal in the multiple products that they're now buying from us. So that was a very conscious strategy. Chad Bartley - Pacific Crest Securities, Inc.: Should we expect continued declines? J. Sherman: Well, I think that it depends on at some point, that business becomes small and the Media business starts to grow so rapidly that you could see a turn there. The question now is get it in two or three years, where do you think that percentage looks like value-added versus volume. The answer is it really depends on how rapidly we see the growth in the media space take off.

Thank you all for tuning in. I appreciate it. We will be back in another three months to give you another update. Thank you. Goodbye.

Ladies and gentlemen, thank you so much for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a great day.