Akamai Exceeds Fourth Quarter Guidance on Top and Bottom Lines - But Lays Off 400 Workers

Cambridge-based Akamai Technologies Inc. has laid off about 400 people, roughly 5 percent of its global workforce, in the past few months as experiments meant to reignite growth in one of its core divisions have failed.

The layoffs have mostly hit employees in Akamai's Media Division, CEO Tom Leighton said on Tuesday during the company's fourth quarter earnings call. That division, which is largely in the Cambridge headquarters, uses the company's global network of hundreds of thousands of computer servers to host customer websites and other online content as close to end users as possible, making load times shorter.

It's the core technology that turned Akamai (Nasdaq: AKAM) into one of the top tech companies in Massachusetts, but some of the division's largest customers — including Apple, Facebook, Netflix and Microsoft — have begun to build their own in-house content delivery networks over the past few years, reducing their reliance on Akamai.

Akamai had been experimenting with new software products in that division, executives said on Tuesday's call, but none of them have caught on with customers so Akamai is shutting down the projects and laying off many of the R&D engineers that worked on them. Akamai recorded a $52 million charge as a result of the restructuring in the fourth quarter of 2017 and estimates it will record another $15 million charge in the first quarter of 2018.

Leighton emphasized that while Akamai is cutting in the Media Division, it plans to reinvest in other areas of the company that are growing faster, especially its web security products. He didn't share details about how many people might be hired in that division.

The layoffs began early in the fourth quarter of 2017, before activist investor Elliott Management unveiled a 6,5 percent stake in Akamai in mid-December. Leighton declined to answer an analyst question about whether Akamai would consider selling itself under pressure from Elliott. A report in January indicated Akamai hired Morgan Stanley to lead a strategic review of its options, including a sale of the $11 billion firm.