Four questions
That's outstanding performance, but can it continue? There's no way to know for sure. We can, however, make an educated guess using a four-question test called a sustainability analysis:
Can a competitor easily duplicate Akamai's competitive advantage? No. Its secret sauce is a patented algorithm, and its global network of servers would take months to imitate well. Still, the open-source BitTorrent technology isn't to be taken lightly.
Can a competitor substitute a better strategy? Maybe a large data center operator. Take Google (Nasdaq: GOOG), for example. It could add intelligence and bandwidth to its vast network that would, in effect, reduce Akamai's edge.
Can someone prevent Akamai from executing its strategy? Apple (Nasdaq: AAPL) or Microsoft (Nasdaq: MSFT) could decide to pull their business, either of which would seriously hurt revenue. Yet neither seems likely to me. Akamai provides millions in sales for these and many other customers.
Is there wasted energy inside Akamai that stands in the way of effective execution? Unlikely, particularly in light of the company's rising margins.
In other words, Akamai is in a great position now, but that could change if Google were to mount an assault, or if Apple or Microsoft decide Akamai's services are no longer needed. Each represent big risks to the company, and deserve a watchful eye.
