Natalie Temple Paul L. Sagan - Chief Executive Officer, President and Executive Director James Benson - Chief Financial Officer and Executive Vice President

David M. Hilal - FBR Capital Markets & Co., Research Division Mark Kelleher - Dougherty & Company LLC, Research Division Michael Turits - Raymond James & Associates, Inc., Research Division Sterling P. Auty - JP Morgan Chase & Co, Research Division Jennifer A. Swanson - Morgan Stanley, Research Division Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division Colby Synesael - Cowen and Company, LLC, Research Division Aaron Schwartz - Jefferies & Company, Inc., Research Division Richard Fetyko - Janney Montgomery Scott LLC, Research Division Ben Z. Rose - Battle Road Research Ltd. Gray Powell - Wells Fargo Securities, LLC, Research Division Rob Sanderson - ABR Investment Strategy LLC Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division Donna Jaegers - D.A. Davidson & Co., Research Division Chad Bartley - Pacific Crest Securities, Inc., Research Division

Good day, ladies and gentlemen, and welcome to the Second Quarter 2012 Akamai Technologies Earnings Conference Call. My name is Derek, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Ms. Natalie Temple of Investor Relations. Please proceed.

Good afternoon, and thank you for joining Akamai's investor conference call to discuss our second quarter 2012 financial results. Speaking today will be Paul Sagan, Akamai's President and Chief Executive Officer; and Jim Benson, 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 as of July 25, 2012. 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 and Events portion of the Investor Relations section of our website. Now let me turn the call over to Paul. Paul L. Sagan: Thanks, Natalie, and thank you, all, for joining us today. Akamai performed extremely well in the second quarter across all of our key financial metrics. We delivered record revenue of $331 million, up 20% from the same period last year and our third consecutive quarter of accelerating year-over-year growth. We grew the bottom line even faster than revenue in the quarter, generating normalized EPS of $0.43 per diluted share, up 23% from Q2 of last year. We had another very strong quarter of cash flow generation, with $150 million of cash from operations. This cash generation puts us back over $1 billion in cash and equivalents, even after completing 2 significant acquisitions earlier this year. We continue to see strong demand across all of our key verticals and markets, importantly with more applications and transactions moving to the Internet. Sales of our cloud infrastructure solution accelerated 22% on a year-over-year basis. Revenue, profit and cash flow performance in the first 6 months of the year all set records for Akamai. I'll be back in a few minutes to talk about how our solutions are helping our customers adapt to the biggest trends driving IT. But first, let me turn the call over to Jim for details on Q2. Jim?

Thank you, Paul. As Paul just highlighted, we had a great quarter. We saw continued strong performance in our content delivery solutions and accelerated revenue growth in our cloud infrastructure solutions. At the same time, we began to realize significant benefits from improvements we are making to scale our network operations, resulting in higher-than-expected gross margins in EBITDA for the quarter. We did all of this while continuing to make key investments back into the business to better enable customers to move more and more of their mission-critical business to the Akamai cloud, securely and efficiently. Since the beginning of the year, we have released 7 new products, entered into several important new partnerships, accelerated key go-to-market initiatives and successfully completed 2 acquisitions, while at the same time, maintaining strong profit margins. Diving into the details of our second quarter results, our revenue was $331 million, coming in above our guidance. This was up 20% year-over-year and up 4% sequentially. As Paul noted, this represents the third consecutive quarter of accelerating revenue growth, with revenue growth accelerating in every vertical and every geography during the second quarter, exceeding our expectations. Cloud infrastructure solutions growth, accelerated to 22% year-over-year, made up 58% of our total revenue. And in terms of brand-new customers to Akamai, over 75% purchased a cloud infrastructure solution. Turning to our verticals, Media & Entertainment delivered healthy growth in the quarter, with revenue growing 19% over Q2 of last year and 4% sequentially. We continued to see strong traffic growth, building on the trend that began last fall. Our commerce vertical grew 21% over Q2 of last year and declined 1% sequentially in what is typically a slower seasonal quarter for eCommerce. We saw excellent growth year-over-year from continued demand for our dynamic site acceleration solution as well as solid early traction for our security portfolio. Revenue from our enterprise vertical grew 18% year-over-year and 5% sequentially, as companies continue to shift their content and applications to the cloud and leverage the security and performance of the Akamai Intelligent Platform. High tech continued its strong start to the year in Q2. Revenue in this vertical grew 18% year-over-year and 4% sequentially, driven by higher software download volumes. We also continued to see traction among Software-as-a-Service, or SaaS providers, that migrated to our cloud infrastructure solutions. Finally, Public Sector revenue was very strong, growing 23% year-over-year and 18% sequentially. Much of this performance was driven by several custom projects that were completed in the quarter for different government agencies. Turning to our geographies, sales outside North America represented 27% of total revenue in Q2, down 1 point from the prior quarter. This revenue grew 1% sequentially and 11% year-over-year, despite currency headwinds. Stronger dollar had a negative impact on our revenue of about $1.5 million sequentially and $5.5 million on a year-over-year basis. Excluding the impact of currency, revenue growth outside North America accelerated from Q1 levels, growing 17% year-over-year and 3% sequentially. We saw accelerated growth at all of our major European and Asia-Pacific markets. Revenue from North America grew 23% year-over-year in Q2 and was up 5% sequentially. Resell has represented 21% of total revenue, flat with the prior quarter. Turning to costs. We were extremely pleased with the performance on cost of goods sold and gross margins in the quarter, with cash gross margins of 80%, up 1 point from the prior quarter and flat with the same period last year. GAAP gross margin, which includes depreciation and stock-based compensation, was 68% for the quarter, consistent with both Q1 and the second quarter of last year. These results are better than the guidance we provided on gross margin earlier in the quarter. Our network operations and engineering teams have been heavily focused on implementing a number of hardware and software initiatives designed to manage our global network more efficiently. These projects provided early benefits in Q2, positively impacting our gross margins. And we believe they will allow us to continue scaling our network, going forward, without increasing COGS at the same rate. GAAP operating expenses were $157 million in the second quarter. These GAAP numbers include depreciation, amortization of intangible assets, stock-based compensation and acquisition-related charges. Excluding these charges, our operating expenses for the quarter were $122 million, up $10 million from Q1 and roughly in line with our expectations for the quarter. Adjusted EBITDA for the second quarter was $143 million, that's up 13% from the same period last year and flat with Q1 levels. Our adjusted EBITDA margin came in at 43%, better than our guidance range of 41% to 42%, down 2 points from the prior quarter and down 3 points from the same period last year. For the second quarter, total depreciation and amortization was $50 million. These charges include $40 million of network-related depreciation, $5 million of G&A depreciation and $5 million of amortization of intangible assets. Net interest income for the second quarter was about $2 million. Moving on to earnings. GAAP net income for the quarter was $44 million or $0.24 of earnings per diluted share. As a reminder, our GAAP net income includes several noncash or nonrecurring items, including $28 million of stock-based compensation, including amortization of capitalized equity-based compensation and $5 million from amortization of acquired intangible assets. We are including GAAP taxes in our normalized earnings, and the GAAP tax charge was $26 million, based on an estimated full year GAAP tax rate of about 39%, approximately 1 point lower than our guidance range. Based on this full year tax rate, our normalized net income for the second quarter was $78 million. This translates to 43% -- $0.43 per diluted share on a normalized basis, up $0.08 from Q2 of last year and up $0.02 from Q1 levels. This was above our guidance range coming into the quarter as the increased revenue growth and effective management of our network combined to drive a very positive result on the bottom line. Our weighted average diluted share count for the second quarter was 182 million shares. Now let me review some balance sheet items. Cash from operations for the second quarter was a record $150 million. Year-to-date, we have generated $242 million of cash from operations or 37% of revenue. At the end of Q2, we had just over $1 billion in cash, cash equivalents and marketable securities on the balance sheet. Capital expenditures, excluding equity compensation, were $56 million, below our guidance range, due primarily to the timing of some network investments that shifted out of the second quarter. This number includes both investments in the network as well as capitalized software development. During the quarter, we spent $67 million in share repurchases, buying back 2 million shares at an average price of just under $31. Since the inception of our share repurchase program, we've spent $558 million buying back a total of 20 million shares at an average price of just over $27. And finally, days sales outstanding for the quarter was 57 days. Rounding out the first half of the year, Q2 provided us with another strong quarter of growth for both cloud infrastructure and content delivery solutions. We believe we have very strong momentum as we head into the back half of 2012. In our view, the very healthy signings we've seen for our cloud infrastructure solutions demonstrate the value Akamai can bring to enterprises that want to realize the benefits of doing business over the Internet. In addition, traffic growth accelerated once again for our content delivery solutions, in part due to our strong presence with social media and gaming customers, as well as our traditional strength with online media clients. Looking forward to Q3, we expect revenue in the range of $332 million to $342 million. Midpoint of our revenue guidance translates to 20% year-over-year revenue growth. At current spot rates, foreign exchange should be about a $2-million negative impact on a sequential basis and about $7.5-million negative impact on a year-over-year basis. We expect gross margins to remain relatively stable with cash gross margins in the range of 79% to 80%, and GAAP gross margins, which include equity compensation, in the range of 67% to 68%. Q3 operating expenses are projected to be up a couple of million dollars from Q2 levels and we expect EBITDA margins to come in at about 43%, consistent with Q2 levels. We expect to see fully taxed normalized EPS of $0.40 to $0.42 for the quarter. At the midpoint of this range, this represents 21% year-over-year growth. This EPS guidance includes taxes of $27 million to $30 million, based on a full year GAAP tax rate in the range of 38% to 39% and also reflects a fully diluted share count of 180 million shares. On CapEx, we expect to spend $60 million to $65 million in the quarter, excluding equity compensation. For the full year, we expect CapEx to be within our model of 13% to 16% of revenue. Overall, we are very pleased with the performance of the business in Q2 and the momentum we have heading into Q3. Now let me turn the call back over to Paul. Paul? Paul L. Sagan: Thank you, Jim. As most of you know, we believe there are 4 major trends driving business online and fueling great potential for Akamai: cloud computing; mobility; online video; and a need for much stronger Internet security. Businesses of all types have an unprecedented opportunity to use the Internet to drive growth and accelerate innovation, returning to cloud computing to achieve greater agility and reduce costs. We're implementing mobile strategies to reach customers, employees and partners in dramatically new ways and are finding greater opportunities to attract viewers and generate significant revenue at delivering interactive video. We've been seeing this in virtually every industry we serve and in all key geographies where we operate. Same time, enterprises are facing many new challenges with their online initiatives. Business leaders know that providing foresight or application performance can do real damage. Not properly securing an online application or data may lead to real losses, and failing to scale capabilities to meet rising demand can disappoint existing customers and new prospects alike. That's where Akamai comes in. Our expanding and unique portfolio of solutions is designed to help our customers overcome these challenges and deliver a consistent, protected and dynamic experience for users across virtually every device, geography and application. Turning to security. This is one area where we can address these real business problems. Of this quarter, we had 74 new security signings. Now providing our security solutions over 250 Akamai customers, and over 20% have already purchased more than 1 security product to defend their web properties. The new Kona Site Defender provides a robust, sophisticated layer of web security from Akamai's global cloud to defend against a range of security threats, and we do it without sacrificing performance of a client's site or application. In February, we've already signed up more than 40 customers for this new service. Beyond security, while CIOs understand how adopting cloud computing can cut costs and improve flexibility and agility, we're also worried about the very real possibility of decreased performance and application availability in hybrid environments. Akamai is addressing these concerns with solutions designed to improve the way enterprises are both delivering and consuming cloud services. We recently introduced Akamai Terra Cloud Catalyst for cloud service providers who are interested in offering their customers an optimized experience. This technology makes it easy for Infrastructure-as-a-Service, Platform-as-a-Service and hosting providers to add the power of the Akamai Intelligent Platform to their offerings. Customers of leading providers such as Rackspace, HP and others are already experiencing the benefit of Akamai's performance improvements embedded in the solutions they are consuming every day. For individual businesses and SaaS providers delivering applications over the public Internet, we recently launched Akamai's Terra Alta service. Customers of this solution now have a simple way to integrate Akamai technology into their existing IT operations, resulting in measurable improvements in the way their users experience online applications around the world. Since its introduction in late March, Terra Alta has also been well-received. And turning to mobility, all of our customers face user demands to deliver content and applications to an ever-increasing variety of mobile devices. Just having a mobile site or application isn't enough. Users want the same experience they get from their fixed line connection. They expect high performance and will quickly abandon a mobile site if their expectations aren't met. But we have a multi-pronged strategy to help our customers deal with a particular demand of mobile users and applications. We introduced Aqua Mobile Accelerator last quarter to help customers overcome specific issues they encounter from latency and packet loss over cellular networks. And we're encouraged by early interest in this new offer. We also worked with Ericsson last quarter to introduce their Smart Cloud Accelerator solution, which embeds Akamai technology in Ericsson's SSR 8000 family routing gateways. Just last month, we announced that we'll be working with Qualcomm to optimize delivery to mobile devices that are built on the Snapdragon chipset. We think there are even more opportunities to help our customers with mobile applications and content and we expect to continue to introduce new capabilities in this important arena. And for video, we've been able to find even more effective and efficient ways to support the delivery of dramatically increasing volumes on wired and wireless networks. A great example of this phenomenon is the 2012 London Olympic Games kicking off this week. I predict the games will attract at least 1 billion online viewers. Once again, Akamai is supporting many of the world's major broadcasters as they prepare to stream an unprecedented amount of video from London. Across the board, from cloud computing to media and from mobility to online security, this is a very exciting time for our business. And I couldn't be more pleased with how Akamai is performing now and I'm very excited about our future plans. Thank you, again, for joining us today. Jim and I would now like to take your questions. Operator, the first question from the queue, please?

The first question is coming from the line of David Hilal from FBR. David M. Hilal - FBR Capital Markets & Co., Research Division: I got two. First, Paul, you talked quite a bit about the security offering and the increased traction there, which is great to see. I specifically wanted to dive into the Riverbed and QUALCOMM partnerships. And I don't know if there's any qualitative or quantitative you can share with us there on how those 2 are going? Paul L. Sagan: What's the second question? We'll just take them both. David M. Hilal - FBR Capital Markets & Co., Research Division: The second question is for Jim. So on margins, you guys put together a good quarter in margins, and that guide for Q3 looks pretty good too. I'm specifically talking about the EBITDA of 43%. And so after a couple of years of margins eroding, do you feel like now you're getting more efficiencies out of the infrastructure, where we should view margins as flat or possibly up? I guess, really what I'm asking, what is kind of your margin outlook, not just for the next quarter, but over the next year or 2? Do you think we stabilize, go higher, go lower? Paul L. Sagan: All right. I might just take them both in reverse order, okay? So I think what you're seeing on margins is tremendous work by our software teams and our network teams to find unique and proprietary ways in our network and our software to drive significantly higher throughput, greater efficiency with the same great performance our customers expect. And that we're seeing earlier dividends than we expected, which is why we overachieved so well on margin. We think there's more to come as we develop it. We're not going to give you long-term guidance. You know we don't do that quarter-by-quarter. We've given you expectation for CapEx for the year and for margin in the near term. So let me just say, we're very pleased with what we're seeing out of the efforts and the renewed focus that we brought to COGS. And I think that there's more to gain there over time. At the same time, we're going to invest in innovation, so we're going to balance the 2 very well but maintain a very profitable business. On the other -- partnerships, the Riverbed partnership we announced about a year ago. About a quarter ago, we said we were now selling. We're starting to close deals, so I'm very pleased with the early signings. It is an enterprise solution sale, so that's usually not a transaction to close, but we're pleased with what we're seeing, and we're actually signing now full contracts with customers for that new solution. So we're pleased with the early in-market results. And the Qualcomm announcement was very recent, and that's a technology partnership to try to work collaboratively with one of the leading technology providers in the cellular space to effectively embed some of our technology in their chips. As those gain traction in the marketplace, it will allow us to bring to our customers even better performance for content and applications on devices that use those chipsets. We think that's very exciting. As I said, mobility requires a multi-pronged strategy. There isn't a single magic bullet. What you see is the breadth of our technology capabilities, the breadth of our customer relationships allowing us to partner at many places in the ecosystem, even ultimately down to the chip in the devices themselves to bring really unique solution to improving performance, which benefits everybody, benefits the end users, benefits the handset manufacturers. It benefits the network, which is really important because they're trying to figure out how to drive more capacity in a very expensive environment. And it benefits our customers, who are looking for the highest-performing way to reach their customers. So we think working with that broad ecosystem is going to be key to our leadership position in that aspect of web performance.

Next question is from the line of Mark Kelleher, Dougherty & Company. Mark Kelleher - Dougherty & Company LLC, Research Division: I wanted to just go back to gross margins a little bit. You did talk about the operating benefits you've been getting. Maybe you could address the pricing dynamics that you saw in the quarter? What was that doing to gross margins, both on the CDN and the cloud side, and maybe tie that into what you're seeing in competition? Paul L. Sagan: The market has always been competitive. We've always talked about the need to drive high-value solutions that our customers will pay for. We're continuing to see the same kind of competitive dynamic that we've traditionally seen and the same pricing dynamic. I think what you're seeing is effectiveness of the team to innovate and bring new high-value solutions that our customers are willing to pay for across cloud, infrastructure solutions, particularly now security, as well as media, which is really reflected by the accelerating traffic that we've been seeing there, which is our customers bringing more content to market and relying more on Akamai to deliver. So I'd say the general atmosphere is consistent with what we've seen, and I think the overachievement on the top and the bottom line has been really, really good execution by the teams here, working with our customers to deliver products and our network partners to drive capacity up and cost down in large part through huge innovation in our own software.

The next question is from Michael Turits, Raymond James. Michael Turits - Raymond James & Associates, Inc., Research Division: Just really strong acceleration on the cloud side. Is there anything that you can tell us about what in particular was stronger in terms of products on the cloud side, what drove that reacceleration versus last quarter? And then also, you had a full quarter of Cotendo. If you can give us any feel for how much contribution that made and how much that might've been cloud versus content? Paul L. Sagan: Well, most of Cotendo is on the cloud side. We said that once that was integrated, we wouldn't be breaking it out, and they've been integrated and that process has gone very, very well. What you're seeing is across the board, the products that I talked about. Security is the newest area we've been in, but the Terra products, both, that we sell direct to our customers improved application, performance; and to the service providers that allows them to provide Akamai optimization to their customers, particularly now with the Cloud Catalyst product that allows people to add our capability seamlessly through other people's portals and other people's selling motions, allowing us to grow there. So I think you see a combination of innovation of new products like security catching on, as well as really good infield motion of direct selling and improved channel management or partnering capabilities to drive strong results there as well. And the Cotendo team contributed with a good customer base, good functionality and we're continuing to add there on the development side to build, we think, a strong pipeline of products to come in the coming couple of years. Michael Turits - Raymond James & Associates, Inc., Research Division: And just one other question in a completely different direction. A couple of years ago, about 1.5 years ago now, you had that synchronization of a bunch of media contracts coming up for renewal all at once it -- has that -- have those cycles smoothed out now or could you... Paul L. Sagan: Yes, Michael, I think we've answered that one every quarter. Yes, that was a onetime. They recycled themselves on different rate and pace, and that effect was 1.5 years ago now.

Next question is from Sterling Auty, JPMorgan. Sterling P. Auty - JP Morgan Chase & Co, Research Division: Since 2008, it looks like if you're successful in the next quarter, this would be the second time that you've kind of made that trip to 20% revenue growth. My question is do you feel like there's enough drivers now to make this higher growth rate more sustainable? And what visibility do you have in that sustainability? Paul L. Sagan: Well, I think there was a global meltdown in the middle, and that one was out of our hands. I don't mean to be flip, but there are externalities that are way beyond our ability or anyone's ability to fully predict or plan. We've been very pleased with what we've seen over the last year. We gave you guidance for the quarter and then for the year on CapEx. We're not going to go beyond that. I will say that I think that the forward trends are continuing in providing us opportunity around cloud, around mobility, around video and security. Those continue, and frankly, even in the soft spots around the world like Europe, we're still seeing strong demand for those kinds of services there that we're not immune from the global recession. Somebody said, "Congratulations, you're immune." No, maybe we would do better if the economy was thriving, but we have products that are value to people who are continuing to move their businesses online even in tough economic times, and we think that they're catalyst for a strong growth for us, but I'm not going to give you a long-term growth projection. Sterling P. Auty - JP Morgan Chase & Co, Research Division: Okay. Maybe one follow-up would be -- you're talking about cloud was growing 22%, but just -- I want to make sure we're clear and we're on the same page. Are you saying -- is cloud incorporate all of what we used to call VAS or can you give us some commentary or quantitative figures in terms of... Paul L. Sagan: I'll give that to Jim.

Yes, what we call cloud infrastructure solutions, we previously called value-added solutions. And as Paul said, they did grow 22%. Michael had asked the question around the impact of Cotendo. What we -- we're still not going to break Cotendo out separately because we've embedded it in the rest of Akamai. But we did share last quarter that Cotendo was a little less than $2 million a month, just as a frame of reference. But if you adjust for Cotendo and for constant currency, we grew cloud solutions 22%, regardless. So it was a very strong cloud solutions quarter.

Your next question is from Jen Swanson Lowe, Morgan Stanley. Jennifer A. Swanson - Morgan Stanley, Research Division: I just want to follow up a little bit on Cotendo and also on the Blaze acquisition, which are both important acquisitions. And I know people have asked about the financial impact, but just curious more on the business impact. How has that integration been going? Where do you think you are in the process? And what are sort of the benefits maybe that you're starting to see from those 2 acquisitions? Paul L. Sagan: Sure. Well, Cotendo brought revenue and customers, and we've done well so far, integrating customers across our network to our suite. There's still a process to go. We said that beginning to end, that could -- that would take about 18 months, so we're clearly not through it. But we've made good progress and we're on or ahead of planning the same with integrating personnel and starting to move people off of integration as much to new things. Very encouraged by what we're seeing out of the capabilities at the development center in Israel and we have ambitious plans to ramp up hiring there. There's great engineering capability, including on the security side. And as we do more in cloud security, we'll be looking for more -- to build out more expertise in that office and other places. And then we will be announcing or just subtly moving functionality from Cotendo into some of our cloud infrastructure. Our product Blaze, for those people who maybe didn't follow us closely, was an FEO or front-end optimization technology. Again, a great engineering team integrated it to Akamai. They didn't bring revenue and a large customer base. They've brought a really important functionality to further improve the performance of websites. We've not made any product announcements with that technology, but we're really pleased with that now that it's under our roof. And over the next few quarters, we will be making product announcements in that area that we think are significant as well. Jennifer A. Swanson - Morgan Stanley, Research Division: And then just as a second question, not necessarily related but following up on Sterling's question earlier around the sustainability of some of the trends you're currently seeing in your business. I think 3 quarters ago, when you started to see this inflection in traffic growth, you were reluctant to label it as a new sustainable trend and kind of cautioned that, that can be cyclical. Now it's my impression as the tone seems a little more confident around the duration and stability of that increase in traffic. Are you -- is it -- do you have more confidence there that that's a sustainable trend versus cyclicality in the traffic business? And what are sort of the things that you're looking for to make that determination? Paul L. Sagan: Well, historically, the cycle go on for a little while. They're not 1 or 2 quarters, especially if you can hold constant for sort of economic turmoil. We've been really pleased with what we see. We have some visibility in it from our customers. We think the drive to more media, video, particularly online, because of the ability to drive high-quality, both the fixed line and wireless environment is important and with high quality and high security. So we believe it will continue to grow. We've been pleased with what we've seen for the last few quarters, but it remains the hardest piece to predict. Long term, we think the long-term trend is going to be more video over-the-top. Again, the majority of TV viewing in the home is old-fashioned TV, so there's lots of opportunities to grow the delivery of video, particularly high-quality video. So I think you've seen us be increasingly optimistic about it just because we've got more data points on a steeper curve. But I don't think that's a space that will ever give you really long-term specifics on because it is a little cyclical. But right now we're certainly in a good part of that curve.

Next question is from Ed Maguire, CLSA. Edward Maguire - Credit Agricole Securities (USA) Inc., Research Division: I was wondering if you could just comment on -- going back to the Cotendo acquisition. Just discuss, you had a number of different partnerships, how the rationalization of the products and partners is working? And also, to follow up on that, you'd mentioned that the Riverbed partnership is tracking well and Ericsson is expanding your mobile footprint into -- along into Qualcomm partnership. How -- could you discuss how that go-to-market is tracking as well? That's 2 questions in 1. Paul L. Sagan: Sure, Ed. So as I said earlier, very pleased with the integration of Cotendo, including how we're working the product into our portfolio and maintaining the existing customer base they brought over and then selling new things to those customers as well. I'm very pleased so far with the tracking of migration of partnerships and resellers throughout the world. That's gone very well. The others, obviously, some of them are technology partnerships like the one we announced recently with Qualcomm and technology plus go-to-market with Riverbed. I think what you're seeing is an overall theme. Akamai sits in the cloud. In many ways, we were the original and largest. And so as the world moves to cloud computing, hybrid environments and providers look to join that ecosystem and grow, we're just a logical partner because we are so complementary. We're complementary with hosting providers who want to now provide a cloud model. We're compatible with people who are trying to make mobile work better as part of the overall solution for people who want to bring sites or applications online. And so we've invested in being a better partner back, how do we embed some of our technologies, something that 5 years ago, we didn't do, embedding Akamai technology in other people's products. And we also didn't embed their technology in our products, and these partnerships are examples of both, more of the technology in one place talking to our network or vice versa. And we think that over time, this will also raise the value of our services and drive new revenue opportunity. Some will be more immediate in terms of the joint product like Riverbed opportunity. Other will simply enhance the value of our products and theirs, like what we're trying to do. With Qualcomm and in the case of Ericsson, you have some of both. Now in the wireless space, particularly when you're talking about carriers, getting those embedded and rolled out takes a while. It's not exactly a set of operators who necessarily move quickly, which is why we've taken a long-term view. But we're making a long-term bet that mobility will be increasingly important and that our customers will look to us to help them as part of an overall solution. If we do that well, they'll want to do more with Akamai. If we don't, we won't be as valuable, and that's why you see us doing these kinds of things, and if you will, kind of spreading our reach and our ability to work with more and new kinds of entities in the ecosystem of the Internet.

Next question is coming from Colby Synesael from Cowen and Company. Colby Synesael - Cowen and Company, LLC, Research Division: Great, I have 2 questions. Paul, I think in recent conference, you've mentioned that in the future, Akamai could actually be a security company that sells CDN services. Obviously, security, it sounds like it's pretty important to the company's long-term future. Was there -- curious if you could try to quantify for us how big security is at this point and maybe kind of expand on what you meant when you made those comments? And then the second question that I have has to do with your headcount ramp. You guys added about 115 employees. It seems like a decent amount. I know you added more last quarter, but I think part of that was for Cotendo. Curious where those employees have been deployed in the company and maybe more specifically, how you're changing some of your go-to-market strategy as it relates to the sales team? Paul L. Sagan: Sure. I think my comment, and I think you quoted me about, correctly, was really about how big the opportunity is for security in the cloud. And my general point was that if we really executed well with security -- cloud security offers like Kona Site Defender, years down on the road, people might actually think about us as a cloud security company who also did delivery and performance because the opportunity is that big. I didn't mean to imply that we were going to be the whole market or that cloud security would replace traditional security in-depth layers. I think with the rising threat level, that's not going to happen, but I do think this sort of -- if you think of secure the device, secure the perimeter now, secure the cloud as the emerging area, we have the opportunity and are now taking an early leadership position and secure the cloud, secure outside the perimeter because effectively, your firewall is becoming so virtual anyway in a hybrid environment. And so we're pushing hard. You see us talking about the opportunity, very strong sale. It's still a relatively small part of our cloud infrastructure business today, which gives us lots of room to grow, lots of room to penetrate existing customers and then to go, frankly, we can now sell the solutions to people who aren't Akamai customers and they don't even have to buy any other Akamai services to get started if they want us to do some cloud security for them first. So we think it's a great way to add to existing accounts and to go get new ones. We're very excited about security. Long way to go before you start referring to us as a security company first, and I think we've got a lot to prove. But the early steps there, I think, have been well executed. I'm very pleased with what the team has done. I'll let Jim talk about the headcount ramp, and obviously, the things to remember in terms of summer hiring and acquisition and other things that go into the mix.

Right, and -- so you're right, we added a little over 115 -- I think we added 115 people in the quarter. We added more than that in Q1, but remember, I think you were referencing it, that was also including the Cotendo and Blaze acquisitions, which were by themselves over 100 people anyway. So in the areas in particular that we're specifically targeting is we're going to continue to build out our go-to-market resources. That's what we did in Q2. We'll do more of it in Q3. The other area, in particular, that we're going to be focusing on adding resources is in the R&D area to continue to drive product innovation. And we talked about the -- I mentioned in the opening remarks that we announced 7 new products already in the first half of the year. We expect to announce more products in the second half of the year and beyond, and we're going to continue to add engineers to fuel that pipeline.

Next question is from Aaron Schwartz from Jefferies. Aaron Schwartz - Jefferies & Company, Inc., Research Division: Just a quick follow-up and one question for me. But you announced a sales management hire earlier this week. You announced one in Europe earlier this year. It does seem like with your diversification with new products and new verticals, there is some change in the overall go-to-market, which you just alluded to. Are there sort of structural changes in the operations below, any sort of detail you could give us on sort of how you're architecting this internally to take advantage of all the new product you have out? Paul L. Sagan: Sure. We've moved to a theater model with the Americas, with EMEA and APAC and we've appointed 3 senior sales leaders, 1 person in Asia Pac who's already deployed there in a different role. Someone with great experience in enterprise solution selling, a former Akamai executive who has left and then was working for IBM who rejoined us. And then just this month, the appointment of a Head of America -- the Americas region for us as well. I think what you're just seeing is growth and sophistication of the go-to-market effort under a very, very strong leadership provided by Bob Hughes, who has the worldwide responsibility for sales. But also, services and marketing and really all of our forward-facing initiatives in the field. And so you see him building out a team with theater responsibility so that we can be in-market, in-language, fully responsive to what our customers need. Because in the world of the cloud, there's no down for maintenance, there is no hours you're closed. Day and night, 7 days a week, people are using our network to make their business run. And we have to be responsive where they are and so you are seeing us grow the capability of our team, driving more sophisticated management deeper into the field for greater responsiveness, and frankly, authority in the field and putting it in the hands of some really seasoned executives. And I think you're seeing in the accelerating growth and the tremendous results, particularly the cloud infrastructure services. So you're exactly right to pick up on it. It's deliberate and I think it's paying off extremely well, and those 3 leaders are very strong. Obviously 2 have been here for a while, 1's been here for about 1.5 weeks. Still trying to figure out Akamai acronyms, but we're very enthusiastic about their potential. You said you have one other question, I think, for Jim. Aaron Schwartz - Jefferies & Company, Inc., Research Division: No, that was actually it. I was just wondering on the sale side.

Next question is from Richard Fetyko, Janney Capital. Richard Fetyko - Janney Montgomery Scott LLC, Research Division: Just curious how you factored in Europe and what's going on in Europe into your guidance? What consideration did you give it? Paul L. Sagan: So I'll take that. So we actually -- interestingly enough, we actually had a really good quarter in Q2 across all of our markets, as I mentioned. We actually had a good quarter in the European markets as well. Certainly, there's a little bit of caution in the -- kind of the southern countries of Europe, but we saw growth there. I think our value proposition, even in a difficult market, is still very compelling. So while we may not have the opportunity as plentiful in Southern Europe, we still believe, in general, the European market in total, the northern markets, the central European markets are going to grow very well for us. The Asia-Pac markets are going to grow well for us. So we believe that we have significant opportunities to grow, both in Europe and Asia-Pac, as Paul had outlined.

The next question is from Ben Rose, Battle Road Research. Ben Z. Rose - Battle Road Research Ltd.: A question for Jim. Could you talk a little bit about the impact of co-location costs this quarter and perhaps where you think those costs will be going in the next quarter and beyond?

I think Paul highlighted a little bit around -- just in particular, you were trying to provide a little overview in particular what we're doing to drive our network costs and network scale. And really, what that is, is that's allowing us to drive scale in our co-location costs. So we're doing things on the pricing front with co-location costs, so pricing in the sense of making sure that we're located in the right-priced co-location facilities, not necessarily the most expensive ones. And we continue to drive software efficiencies that allow us to get more throughput out of our servers, therefore, we don't need to add incremental co-location costs, nor do we need to add going forward as much incremental CapEx because we'll get more throughput out of the servers that we have. So in general, we're executing very well against that playbook and we think that that's going to continue going forward.

The next question is from Gray Powell, Wells Fargo. Gray Powell - Wells Fargo Securities, LLC, Research Division: Just had a quick one. Really, in the last few days, it seems like there's been increased concern on enterprise spending trends, with even AT&T and Digital Realty making some cautionary comments. Obviously, you guys are a little bit different and doing much better, but can you just give us a sense as to what you're seeing from your enterprise customers over the last month or so? And the comfort level you have with visibility on the vertical? Paul L. Sagan: So far, it's been very positive, and as we said, we were ahead of expectations in every vertical and every geo. We certainly see customers being cautious about spending. But they are pushing forward on most of their Internet initiatives. They see the future to save money in other areas is by going online and to drive future growth in online initiatives. And the most efficient place to be is in the cloud with an application online, reaching users with the data they need, whenever, wherever they want it. Frankly, if you don't do that, you're not competitive in virtually every industry in the world now. So even though there is caution and even though everyone is trying to spend less in aggregate, we see their willingness to spend on Internet initiatives particularly around security and performance. And so I guess, we could speculate that we'd do even better if the economy globally was in great shape. But with it in bad shape, and that's not a good thing, that's just the fact, we're continuing to do extremely well and beat our own projections so far. So we've been very pleased.

Your next question is from Rob Sanderson, ABR Investment Strategy. Rob Sanderson - ABR Investment Strategy LLC: Questions related to products. Just -- I mean, can I throw back one of your answers to an earlier question and see if it's a fair characterization? So really, the acceleration in cloud infrastructure driven by all of the above, but it kind of sounds like -- obviously, Kona Site Defender is doing very well and Terra Alta is driving some momentum. Maybe the mobile accelerator Cloud Catalyst and cloud steelhead are still on the com with a good start. Is that a good way to think about it? Paul L. Sagan: I didn't track everything you put in there. Obviously, things like Riverbed are new. Mobile is fairly new, but we're selling that direct and we've had very strong uptake. It's only been out for a few months. We're not going to break out numbers on every one. We give you the aggregate number, then we're giving you some highlights, where we think we’re seeing some important changes like security. But I think the overall theme -- rather than put your words back in my mouth, let me say what I think I was trying to say, which is we just think that there is a string of innovation you're starting to see that is targeted at the opportunity for growth in the cloud infrastructure space. We're going to continue to improve the products we've brought out and we've got a roadmap for more things to come across every product suite in the next year, 1.5 years, and we're going to push really hard to develop and bring those to market. We think there's more opportunity in all 4 areas of cloud, video, security and mobility. And if we can keep bringing out things that our customers need, short of another total economic meltdown, we're going to be able to find demand in the market for them. Rob Sanderson - ABR Investment Strategy LLC: Could I follow up on Cotendo, just the cross-sell opportunity? I know you've got a number of customers there. Could you remind us how to think about the nonoverlapping customers they bring in? And obviously, you've got this great portfolio of products that I'm sure you're preparing to sell there. Paul L. Sagan: Yes, most of our customers don't overlap. They -- we can't up-sell them until we move them to our network, that's an 18-month process overall. We are moving customers over, have been already for a while. It's going to take 18 months to complete. That has a bell curve, obviously, a few in the beginning and some stubborn ones at the very end, the bulk in the middle. And then we'll get to know them and offer them more things out of our portfolio. So I think that we can sort of think of it as not a full 18-month opportunity because at the end, you're just in the long tail. But a year or more of good opportunity to slowly introduce that customer set to new products, either make the first contact and move them over or on renewals and to sell them things like Kona as we go. And we'll mine that opportunity really probably for the next 1 to 2 years and then try to bring them even more things from our portfolio. But just understand, as soon as we move them over, we don't think of them as Cotendo customers. They're Akamai customers serviced by Akamai people. And we look at what are they taking today and what else could we offer them.

Your next question is from Jeff Van Rhee, Craig-Hallum. Jeffrey Van Rhee - Craig-Hallum Capital Group LLC, Research Division: Paul, 2 very brief questions for you. Number one, on the security front, can you talk to the percentage uplift on ARPU that you're seeing so we have a sense of magnitude from some of the more mature security users? And second, on the network efficiency, can you put a number roughly on what percent of the efficiency benefits we've seen so far? Paul L. Sagan: On the first, we're not going to get into pricing in ARPU on individual products. But these are, particularly the new services, premium products for which we're getting significant revenue and they're good margin products. On the network, we've got a roadmap of changes to come over the next 18 months. They tend to come kind of they're lumpy as you develop new capabilities and then deploy it on the network, so it's not a smooth sort of week-over-week progress. They are sort of step function there, but we have a good roadmap of things that we're going to continue to drive efficiency. Frankly, I -- as we've been doing this on an ongoing basis for years, I couldn't -- I can't quite break it down as sort of a percentage complete as you phrased it. I understand what you're asking, I just don't know how to answer the question that way.

Your next question is coming from Donna Jaegers, D.A. Davidson. Donna Jaegers - D.A. Davidson & Co., Research Division: On the manage CDN service that you guys were offering the carriers, is that launched in the market now and can you make any comments on it? And also on Verizon's move to their own CDN, does that have any impact on you guys at all? Are you helping them? Paul L. Sagan: So I'll say on the last one, they are still a great reseller partner. I don't think it has any implications there, so no impact to date. I think on the other question, there are sort of 2 components. The MCDN or managed CDN. We've been doing that for a while to provide specific solutions to network operators. We continue to offer that. That's a bespoke opportunity and we think we'll see some growth there. The new area is really, the OCDN or Operator CDN where we can allow operators to deploy our technology, that we could provide a software, they can deploy it on their own hardware if they want to. They can manage it on their own for some functionality. They can then federate with us if they want global capabilities or let us operate even more advanced services. We're now in some trials with customers, very good conversations. But that is not -- we did not expect that to be a significant revenue producer. This year, we see that as a very important strategic long-term opportunity. We now have a team built out and a leader for that business group and I'm encouraged by their early progress, but that is a long-term initiative.

The final question is coming from the line of Chad Bartley, Pacific Crest. Chad Bartley - Pacific Crest Securities, Inc., Research Division: I wanted to ask on Cotendo, I know you're not going to talk revenue, and that's fine. But can you remind us which revenue segment, at least at this point, that, that is benefiting? Is it enterprise? Is it technology? Paul L. Sagan: It's primarily -- well, there is -- it's in the cloud infrastructure services. It's site acceleration and some additional services that improve the performance of sites and applications. But most of that revenue has moved into the infrastructure services bucket that did not have a media or a video offer.

And I think specifically, if you're asking which industry verticals that they operate within, it's pretty much across all of them. So as Paul said, it's kind of augments the capability that we had and they -- their customer base sells pretty much across all the verticals that we're in. Probably the light -- mostly in commerce, enterprise and high tech, probably to a little bit lesser extent, in the media vertical. Paul L. Sagan: Thank you, all, for calling in. We look forward to talking to you again in another 3 months. Bye.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great day.