Akamai Technologies Inc. (AKAM) 2002年年度報告「NASDAQ」.pdf

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1、02A N N U A L R E P O R TAkamai Technologies,Inc.AR_02_final.qxd 3/31/03 5:14 PM Page 544.1270To name a few.adidas-Salomon AG America Online,Inc.American SuzukiMotor CorporationThe Bombay Company,Inc.Canon JapanComputer Sciences Corporation FedEx CorporationL.L.Bean,Inc.SAMSUNGSony Music Entertainme

2、ntJapanStaples,Inc.Toyota Motor Sales,U.S.A.,Inc.VeriSign,Inc.VERITAS Software Corporation Visteon CorporationWashington Post.Newsweek InteractiveCustomer Traction and Technology InnovationEDGESUITE CUSTOMER TRACTIONQ1 Q2Q3Q4“Its of critical importance that SonyEricsson leverage the Internets reach

3、and economies of scale to enhance existing business processes and uncover new opportunities.EdgeComputing for Java will allow us to deploy applications that meet our requirements for 24/7 global business operations.”Mats Frisk,Core Application Architect,Sony Ericsson Mobile CommunicationsEDGESUITE R

4、EVENUE AS%OF TOTAL REVENUEQ1 Q2Q3Q427.136.439.0Akamai EdgeSuiteADDING MARQUEE BRANDS TO OUR EDGESUITE CUSTOMER LISTAkamai EdgeComputingSMEDGECOMPUTING REVOLUTIONIZES EDGE PROCESSING AND DELIVERYMAKING THE INTERNET RELIABLE AND PREDICTABLE FOR CUSTOMERS MISSION-CRITICAL APPLICATIONS“Every solution th

5、at Akamai has provided for us has proved to be more impactful,more economically sound,and has created a better user experience than had we tried to rely solely on developing our own infrastructure.”Robbie Cohen,Technical Program Manager,BMW of North America“Extending our infrastructure across Akamai

6、s platform saved us significant costs that would have been necessary in purchasing new equipment,renegotiating our ISP contractessentially upgrading our entire infrastructureall to handle the traffic,representing over 72 million page views presented during the promotional contest.”Hal Kalish,Directo

7、r of Internet Marketing,LogitechAKAMAI ENABLES ENTERPRISE COMPANIES TO EXTEND AND CONTROL THEIR E-BUSINESS INFRASTRUCTURE02185211243“Enterprises that want to extend and control their e-businessoperations without increasing the associated infrastructure and management costs should strongly consider A

8、kamais EdgeSuite offerings.Akamai now offers buyers a full set of tools,best practices,and professional services to enable customers to easily and quickly scale their dynamic content and Web applications.”Aberdeen GroupAR_02_final.qxd 3/31/03 5:14 PM Page 602A K A M A IH I G H L I G H T ST O O U R S

9、 H A R E H O L D E R SJANMARIn 2002,we progressed on the path to our goal of profitability by reporting two quarters of net positive monthly recurring revenue in the second half of the year,achieving positive EBITDA in the fourth quarter,anddemonstrating an energy that we believe is setting us up fo

10、r success.We are pleased withour operating performance in 2002 despite the challenging macroeconomic conditions.We were particularly encouraged by the considerable improvement in the quality of our customer base and revenues.At the sametime,we developed important new servicesand features in response

11、 to demand from our enterprise and public sector customers.At the beginning of 2002,we set significantgoals,including:Reducing our EBITDA loss and net loss each consecutive quarter;Increasing the adoption of EdgeSuite,our flagship offering,by industry-leading companies;Growing our public sector busi

12、ness;and Improving our cost structure to better match our prospects in todays environment.In 2002,I believe we met or surpassed each of these goals.The success of company-wide efforts to reducecosts enabled us to make significant progressin 2002 toward our profitability goal.Webecame slightly EBITDA

13、 positive in the fourthquarter,one quarter earlier than anticipated.Although profitability,defined as net income in accordance with GAAP,is our ultimate goal,EBITDA,defined as earnings before interest,taxes,depreciation,amortization and othernon-cash and one-time items,is a metric weuse to measure o

14、ur progress toward that goal.Our definition of EBITDA starts with GAAP netloss and backs out depreciation,amortization,equity-related compensation charges,andrestructuring charges for severance and realestate.We take out depreciation and amortization because those are essentiallyfixed costs resultin

15、g from cash outflows in prior periods.Equity-related compensation isremoved because it is a non-cash charge.Restructuring charges are also removed becausewe consider them to be expenses that are one-time in nature and not anticipated to be part of our normal operations.We believe achieving positive

16、EBITDA is a goodmeasure of the companys forward progresstoward profitability because other than interest,which remains flat,the items that are excludedfrom GAAP net loss to arrive atEBITDA,trendeddown in 2002.Our depreciation,amortizationand equity-related compensation havedecreased quarter over qua

17、rter,and,absentunanticipated capital expenditures or changesto our equity compensation plans,we believethat they will continue to decline in 2003,closing the gap to profitability.While webelieve this measure is an indicator of ourprogress toward profitability,you should notconsider it a more importa

18、nt or better indication of our financial results than otherGAAP financial measures,such as our net lossof$52 million for the fourth quarter.We ended 2002 with$125.2 million in cash and marketable securities,a reflection of our competitive cost structure and strongmarket position.We also finished the

19、 year with 270 EdgeSuitecustomers under recurring contract.Thesecompanies included such marquee globalbrands as adidas-Salomon AG,America Online,Inc.,American Suzuki Motor Corporation,The Bombay Company,Inc.,Canon Japan,Computer Sciences Corporation,FedExCorporation,L.L.Bean,Inc.,SAMSUNG,Sony Music

20、Entertainment Japan,Staples,Inc.,Toyota Motor Sales,U.S.A.,Inc.,VeriSign,Inc.,VERITAS Software Corporation,andWashington Post.Newsweek Interactive.Much of this success is the result of ourimproved focus on specific industry and customer opportunities and our more experienced,better-trained enterpris

21、e-focusedsales force.We also benefited from more in-depth business relationships with key business partners,such as IBM and EDS,and better alignment of our technologyroadmaps with market requirements.As a result,we entered into 2003 ready to manage through a difficult economic period with a stronger

22、 business plan focusedon attracting high-quality,new customers to EdgeSuite and up-selling our existing customers.We are optimistic that we will continue to improve on the performance wedemonstrated in the fourth quarter of 2002.MAYFEBAPRThe Akamai Platform,viaA,delivers theMacWorld San Franciscokey

23、note addresssettingnew Internet records for a single,live corporatestreaming event.Akamai is named CDNindustrys market shareleader by NetsEdgeResearch Group.Akamai SiteWise service is chosen by more than 50 companies,including Logitech,Network Associates,and Peapod.Akamai and IBM combine to power a

24、global e-business infrastructure for Cognos.The joint solution enablesthe secure worldwide delivery of Cognos software downloadsAkamai and Microsoftforge a strategic allianceto develop a new edgeservice built on theMicrosoft.NET platform.The joint solution willspeed delivery of Webservices and appli

25、cationsfor enterprises thatdeploy applications onthe edge of the Internet.Akamai is selected byToyotaMotorSales,U.S.A.,Inc.toenhancemarketing initiativesacross its T andL sites.Akamai EdgeSuiteisnamedProduct of theYear byNetworkMagazinefor thesecond consecutive year.Akamai and IBM unveilEdgeSuite fo

26、r Java based on IBM WebSphere,a newedge computing solution.JUNEAkamai EdgeSuite is implemented by MTVNetworks to increase performance across some of its most highly trafficked Webproperties,and .AR_02_final.qxd 3/31/03 5:13 PM Page 1NOVAUGJULYSEPTOCTAkamai is awarded afive-year contract by the U.S.G

27、eneral ServicesAdministration.The contract includes Akamaissolutions among thoseprovided by the GSA tofederal agencies forstrengthened informationassurance of e-governmentprograms.Akamais streaming media services are chosen by theU.S.House of RepresentativesCommittee on FinancialServices to enhance

28、thequality and availability of financial informationfor its online audiences.Akamai CEO,GeorgeConrades,is appointedby President George W.Bush to serve on theNational InfrastructureAdvisory CommitteeNIAC,in recognition of Akamais uniquemacroscopic view of theInternet and growingimportance to the gove

29、rnment sector.Akamai EdgeSuite is implemented by AmericaOnline,Inc.as a scalableextension to its Internetinfrastructure.The agreement also includesa broader deployment ofAkamai edgeservers withinAOLs global network.Akamai appoints RobertCobuzzi as Chief FinancialOfficer.Cobuzzi bringsyears of experi

30、ence from the industrial,telecommunications,and manufacturing sectors.DECAkamai EdgeSuite is chosen by Nissan U.S.A.to extend and control e-business activities on its consumer-focused destinations NissanUSA.comand I.Akamai is the clear leader in the expandingmarket for content and application delive

31、ryservicesfrom basic object delivery andstreaming,to more advanced EdgeSuite capabilities such as:Whole site delivery;Secure content delivery;Denial of service mitigation;Geographic content and application targeting and reporting;Personalization of Web content through dynamic page assembly;andThe ab

32、ility to reduce Internet latency to achieve significantly improved performance.We offer our customers unprecedented visibility and management of their extended networks,from the corporate firewall,to thecritical end-user,including:What type of traffic we are delivering and where;Which content is bei

33、ng consumed and how;and Where users are accessing content and applications.We also alert customers to issues on theirextended networks,while helping to protectthem from viruses and denial of service attacks.Throughout 2003,we plan to release additional customer management and controlcapabilities,inc

34、luding access to data on the health of the Internet,the capacity and performance of the Akamai network,andextensive information about a customersextended enterprise network.These capabilities set the stage for building on our EdgeSuite technology and taking ourcustomer value proposition to the next

35、levelEdgeComputing.EdgeComputing offers Fortune 500 and public sector enterprises the ability to extendand control their e-business infrastructure andto process and deliver applications anywhereon the globe,with an infrastructure that isfast,reliable,scalable,secure,and efficient.In effect,EdgeCompu

36、ting means giving ourcustomers more control over the Internetmaking the Internet predictable enough formission-critical applications,and reliableenough to be an extension of a customersown corporate network.One way to think of this is that we are“virtualizing the data center”an importantstep in enab

37、ling enterprises to consume computing as a utility,on demand.Already we have been described as the first commercial example of an on-demand,global computing utility.For customers,this is important,because itmeans that Akamai is breaking the applicationdeployment bottleneck and enabling improvedappli

38、cation time-to-market and scalabilityapplications that help them competewhileavoiding the need for costly data center build-outs.Just as Akamai has made theInternet predictable,scalable and secure forour content delivery customers,we are nowworking to do the same for application processing and deliv

39、ery.Weve come a long way from the early definition of Content Delivery Networks.For Akamai,we see an expanding marketopportunity that leads from basic object delivery and streaming to extending enterpriseand public sector e-business infrastructuresanywhere in the world,on demand,with visibility and

40、control.We remain committed to this vision and to constant innovation on behalf of our customers.Serving billions of requests eachand every day,being deployed in over 1,000networks around the globe,and working forcustomers who are expanding the way thatbusinesses use the Web,gives us a truly unique

41、view of how the Internet is operating,minute by minute.The resulting insight and know-how guides our technology development,often in real-time response to marketplace requirements.I want to thank each employee for providingcontinued intellectual contribution,energy andenthusiasm,and for a steadfast

42、commitmentto the success of our company.I also want to thank you,our shareholders,for your continued support as we strive toachieve our goals.George ConradesChairman and CEOAR_02_final.qxd 3/31/03 5:14 PM Page 2SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-KFOR ANNUAL AND TRANSITION

43、REPORTSPURSUANT TO SECTIONS 13 OR 15(d)OF THESECURITIES EXCHANGE ACT OF 1934(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the scal year ended December 31,2002ornTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934F

44、or the transition period from toCommission File number 0-27275Akamai Technologies,Inc.(Exact name of Registrant as Specied in Its Charter)Delaware04-3432319(State or other Jurisdiction of(I.R.S.EmployerIncorporation or Organization)Identication No.)8 Cambridge Center,Cambridge,MA02142(Address of Pri

45、ncipal Executive Oces)(Zip Code)Registrants Telephone Number,including area code(617)444-3000Securities registered pursuant to Section 12(b)of the Act:None.Securities registered Pursuant to Section 12(g)of the Act:Common Stock,$.01 par valueIndicate by check mark whether the registrant:(1)has led al

46、l reports required to be led by Section 13or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter periodthat the registrant was required to le such reports),and(2)has been subject to such ling requirements forthe past 90 days.Yes No nIndicate by check mark i

47、f disclosure of delinquent lers pursuant to Item 405 of Regulation S-K is notcontained herein,and will not be contained,to the best of the registrants knowledge,in denitive proxy orinformation statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K.nIndic

48、ate by check mark whether the registrant is an accelerated ler(as dened in Exchange ActRule 12b-2).Yes No nAs of June 30,2002,the aggregate market value of the voting and non-voting common stock held by non-aliates of the registrant was approximately$133,509,507 based on the last reported sale price

49、 of the commonstock on the Nasdaq consolidated transaction reporting system on June 28,2002.The number of shares outstanding of the registrants common stock as of March 24,2003:117,936,403 shares.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrants denitive proxy statement to be led with t

50、he Securities and ExchangeCommission relative to the registrants 2003 Annual Meeting of Stockholders are incorporated by referenceinto Items 10,11,12 and 13 of Part III of this annual report on Form 10-K.AKAMAI TECHNOLOGIES,INC.ANNUAL REPORT ON FORM 10-KFor the Fiscal Year Ended December 31,2002TABL

51、E OF CONTENTSPagePART IItem 1.Business1Item 2.Properties 12Item 3.Legal Proceedings 12Item 4.Submission of Matters to a Vote of Security Holders14PART IIItem 5.Market for Registrants Common Equity and Related Stockholder Matters 14Item 6.Selected Financial Data 14Item 7.Managements Discussion and An

52、alysis of Financial Condition and Results ofOperations16Item 7AQuantitative and Qualitative Disclosures About Market Risk 29Item 8.Financial Statements and Supplementary Data 30Item 9.Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure 63PART IIIItem 10.Directors and

53、Executive Ocers of the Registrant 64Item 11.Executive Compensation64Item 12.Security Ownership of Certain Benecial Owners and Management64Item 13.Certain Relationships and Related Transactions 65Item 14.Controls and Procedures 65PART IVItem 15.Exhibits,Financial Statement Schedules,and Reports on Fo

54、rm 8-K 66Signatures 67iPART IItem 1.BusinessWe believe that this report contains forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995.These statements are subject to risks and uncertainties and are basedon the beliefs and assumptions of our management

55、based on information currently available to ourmanagement.Use of words such as believes,expects,anticipates,intends,plans,estimates,should,likely or similar expressions,indicate a forward-looking statement.Forward-looking statementsinvolve risks,uncertainties and assumptions.Certain of the informati

56、on contained in this annual report onForm 10-K consists of forward-looking statements.Important factors that could cause actual results to diermaterially from the forward-looking statements include,but are not limited to,those set forth under theheading Factors Aecting Future Operating Results.Overv

57、iewAkamai Technologies,Inc.provides services and software that enable the worlds leading enterprises andgovernment agencies to extend and control their e-business infrastructure.Akamais services are designed toenable enterprises and government agencies to extend the reach of their e-business infrast

58、ructures by ensuringthe highest levels of availability,reliability and performance for all their business processes.Through theworlds largest distributed computing platform,Akamai oers its customers seamless information ow androbust,condent control of information,enabling the secure delivery of netw

59、orked information and applica-tions.Our services are built upon our globally distributed platform for content,streaming media,andapplication delivery,which is comprised of more than 13,000 servers within over 1,100 networks in 66countries.We began selling our content delivery services in 1999 under

60、the trade name FreeFlow.Later that year,we added streaming media delivery services to our portfolio and introduced trac management services thatallow customers to monitor trac patterns on their websites both on a continual basis and for specic events.In 2000,we began oering a software solution that

61、identies the geographic location and network origin fromwhich end users access our customers websites,enabling content providers to customize content withoutcompromising user privacy.In 2001,we commenced commercial sales of our EdgeSuite oering,a suite ofservices that allows for high-performance and

62、 dynamic delivery of web content and applications to end users,wherever they are located globally.These services include content and application delivery,content targetingand personalization,business intelligence and streaming media.Our services are easy to implement and are highly scalable.Historic

63、ally,our FreeFlow customers selectedbandwidth-intensive content,typically media-rich non-text objects such as photographs,banner advertise-ments and graphics,for delivery over our platform.With the introduction of our EdgeSuite service,customersmay dynamically deliver a broader range of content and

64、applications such as customer relationshipmanagement tools,pay-per-view video,software updates and entire websites over our platform.Thetechnology underlying our EdgeSuite service enables us to locate applications and content geographicallycloser to end users.Using the proprietary algorithms we have

65、 developed that continuously monitor and load-balance our network in real-time,we determine the most ecient methods and routes available for deliveringthe applications and content to our customers end users.We were incorporated in Delaware in 1998 and have our corporate headquarters at 8 Cambridge C

66、enter,Cambridge,Massachusetts.Our Internet website address is .We are not including theinformation contained on our website as part of,or incorporating it by reference into,this annual report onForm 10-K.We are registered as a reporting company under the Securities Exchange Act of 1934,as amended,wh

67、ichwe refer to as the Exchange Act.Accordingly,we le with the Securities and Exchange Commission,or theCommission,annual reports on Form 10-K,quarterly reports on Form 10-Q and current reports on Form 8-Kas required by the Exchange Act and the rules and regulations of the Commission.We refer to thes

68、e reports asPeriodic Reports.The public may read and copy any Periodic Reports or other materials we le with the1Commission at the Commissions Public Reference Room at 450 Fifth Street,NW,Washington,DC 20549.Information on the operation of the Public Reference Room is available by calling 1-800-SEC-

69、0330.Inaddition,the Commission maintains an Internet website that contains reports,proxy and informationstatements and other information regarding issuers,such as Akamai,that le electronically with theCommission.The address of this website is http:/www.sec.gov.We make available,free of charge,on or

70、through our Internet website our Periodic Reports andamendments to those Periodic Reports as soon as reasonably practicable after we electronically le them withthe Commission.Industry BackgroundThe end of the 20th century witnessed the explosive growth of the Internet and the emergence ofe-business.

71、E-business is the use of the Internet to streamline processes,improve productivity and increaseeciencies,enabling enterprises to easily communicate with customers,vendors and partners,connect back-end data systems and transact commerce in a secure manner.The Internet,however,is a complex system ofne

72、tworks that was not originally created to accommodate the volume or sophistication of todays businesscommunication demands.As a result,information is frequently delayed or lost on its way through the Internetas a result of many potential bottlenecks,including:bandwidth constraints between an end use

73、r and the end users network provider,such as an InternetService Provider,or ISP,cable provider or digital subscriber line provider;Internet trac exceeding the capacity of routing equipment;inecient or nonfunctioning peering points,or points of connection,between ISPs;and trac bottlenecks at data cen

74、ters.Driven by competition,globalization and cost-containment strategies,e-business is becoming a criticalcomponent for corporate enterprises.These trends require enterprises to rely on an agile e-businessinfrastructure to meet their real-time strategic and business objectives.We expect enterprises

75、to favor moredecentralized information technology architecture to support their goals of disaster recovery,high availability,denial-of-service mitigation and back up.We also anticipate that enterprises will continue to expand their useof technologies that allow an enterprise to conduct business over

76、 the Internet,which are referred to at InternetProtocol,or IP,technologies.Our SolutionsAkamai oers a broad range of secure e-business infrastructure solutions and software that enablecustomers to reduce the complexity and cost of deploying and operating a uniform IP infrastructure whileensuring sup

77、erior performance,reliability,scalability and manageability.Forming the core of these solutions isour EdgeSuite oering,a suite of services that allows enterprises to maximize performance and minimize costwhile distributing their Internet-related content and applications using IP technology.By moving

78、 electronic content and applications closer to our customers end users,our EdgeSuite serviceallows enterprises to improve the end-user experience,boost reliability and scalability and reduce the cost oftheir e-business infrastructure.We believe that our EdgeSuite oering is the only service available

79、 in theindustry capable of providing the benets of distributed performance to an enterprises entire website and allaspects of its applications.Our EdgeSuite service reduces the amount of IP infrastructure required to maintaina global Internet presence.Site owners maintain a control copy of their app

80、lications and content,and ourEdgeSuite service provides global delivery,load balancing and storage,thereby enabling businesses to focusvaluable resources on strategic matters,rather than tactical infrastructure issues.2Customers of our EdgeSuite service have access to the following service and softw

81、are features:Secure ContentEnterprises are increasingly aware that having the ability to transmit content securely over the Internetis a crucial component of their e-business program.Our services oer support for the distribution ofsecure Internet-related content.Using Secure Sockets Layer,or SSL,tra

82、nsport,our EdgeSuite oeringensures that content is distributed privately and reliably between two communicating applications.Tiered DistributionAs their websites and interactions become more complex,enterprises are seeking tools to manage theirInternet presence.Tiered distribution is a hierarchical

83、content distribution method that we use onbehalf of participating customers.With this approach,a set of well-connected core server regions areavailable to store given content and,thus,to alleviate the load on the customers origin servers.Akamais edge servers can obtain content from these core server

84、 regions in lieu of going to thecustomers origin servers under certain conditions.As a result,we are able to eciently distribute ourcustomers content based on unique characteristics and patterns so that our customers can signicantlyreduce the load on their IP infrastructure and protect their online

85、business from unexpected spikes indemand.Site Fail OverIt is essential that e-businesses maintain constant availability of their websites.Our EdgeSuite serviceguarantees delivery of default content in the event that the primary,or source,version of the website ofan enterprise customer becomes unavai

86、lable.Our EdgeSuite oerings default content capabilitiesprovide a solution for:Site mirroring we provide an economical way to mirror a website without the expense of investingin additional data centers to achieve redundancy.Disaster recovery we provide a backup if an unforeseen event causes a websit

87、e to crash.Site maintenance we deliver fail-over service so that a website remains available to end usersduring updates and maintenance.Net StorageFor an enterprise to most eectively utilize the Internet,ecient content storage solutions areessential.Our EdgeSuite service provides a complete solution

88、 for digital storage needs for all contenttypes.Our EdgeSuite Net Storage feature uses multiple terabytes of storage capacity,geographicalreplication,a scalable architecture and proprietary mapping and routing technology to ensure thatcontent is consistently available.Global Trac ManagementOur EdgeS

89、uite service substantially reduces the amount of Internet infrastructure required to maintaina global Internet presence by providing geographically distributed IP infrastructures that reducereliance on an origin site for presentation and application processing and enable site owners to maintaina min

90、imal source copy of the website.Enterprises with geographically distributed IP infrastructurescan use EdgeSuite Global Trac Management to improve the availability,responsiveness andreliability of a multi-location website.When we need to access a customers origin site that has beenmirrored elsewhere,

91、we rely on our Global Trac Management feature to choose the optimal mirroredsite.Global Trac Management frees enterprises from managing complex hardware and allows themto concentrate on their core business.Global Trac Management reduces the need for enterprises topurchase,maintain or house hardware

92、that can rapidly become obsolete and provides continuousmonitoring and support from our Network Operations Command Center,which we call the NOCC.Content TargetingContent Targeting allows our customers to customize content by accurately identifying the visitingusers geographic location,connection spe

93、ed,device type or other specied information so that contentcan be targeted for each visitor in real time and at the networks edge.Content Targeting enables3content providers to deliver localized content,customized store-fronts,targeted advertising,adaptivemarketing and a rich user experience.Digitiz

94、ed DownloadsDigitized downloads consist of software applications and documents that may be downloaded onto thecomputers of permitted recipients.Our EdgeSuite service provides a solution for digital le distributionthat oers our customers the ability to leverage the Internet as a distribution channel,

95、resulting inexpanded customer reach,signicant cost eciencies and time-to-market advantage.The unique,globally distributed network architecture on which the Akamai platform is based enhances the securityand reliability of downloads while reducing infrastructure and bandwidth requirements at the origi

96、nsite.Business IntelligenceEdgeSuite Business Intelligence applications and services provide detailed real-time and historicalinformation on site visitors,their behavior and the eectiveness of a websites content.It also providesIP infrastructure information with details on website performance,site v

97、isitors access points,tracpatterns and automated delivery of logs containing information about website trac and usage inindustry-standard formats.Companies use Business Intelligences comprehensive tools to evaluatetheir strategic investments in website functionality.Streaming ServicesOur streaming s

98、ervices provide for the delivery of streaming audio and video content to Internet users.We oer streaming services in all major formats.We principally focus on enterprise streamingapplications such as video broadcasting of large events over IP networks,and video archives ofcorporate events or public

99、news events.We believe that we have demonstrated superior streamingnetwork performance and quality,particularly for broadband users.Edge AssemblyEdge Side Includes(ESI)accelerates dynamic web-based applications by identifying cacheable andnon-cacheable website page components that can be aggregated,

100、assembled and delivered at thenetwork edge.EdgeSuite Dynamic Content Assembly gives enterprises the ability to deliver rich,dynamically-rendered pages delivered without any performance penalty.EdgeSuite Dynamic ContentAssembly allows companies to assemble and customize website pages at an optimal lo

101、cation within theAkamais global network of servers.Customized content is delivered quickly and reliably to each userwithout forcing interaction with a centralized application server.Edge ComputingEdge computing allows enterprises to extend more of their applications into the network,closer to enduse

102、rs,including customers,partners,suppliers,and employees.By adding application server capabilitiesand support for application and development frameworks,such as Java(J2EE)and Microsoft.NET,Akamai is striving to become a pervasive,distributed,and standards-based high performancedeployment platform for

103、 enterprise applications,Internet-based services and website content of allkinds.For example,we will be launching EdgeComputing for Java,a new service for distributedapplication delivery.Additionally,as part of a broader technology partnership with IBM,we will beintegrating IBMs WebSphere applicatio

104、n server with the Akamai platform.Business Segments and Geographic InformationWe operate in one business segment:providing e-business infrastructure services and software.For theyear ended December 31,2002,approximately 13%of revenue was derived from our operations outside theUnited States.For all o

105、ther periods,less than 10%of revenue was derived from sources outside of the UnitedStates.For more information on our segments and geographic areas,see Note 20 to our consolidated nancialstatements appearing elsewhere in this annual report on Form 10-K.4The Akamai PlatformThe Akamai platform is the

106、collection of Akamais core technologies and global network footprint.Comprising intelligent core technologies such as advanced routing,load balancing,data collection andmonitoring,the Akamai platform is designed to ensure the highest levels of availability,reliability andperformance of information o

107、w between our customers and the Internet.Our platform consists of a global network of over 13,000 computer servers and the complex proprietarysoftware that resides on them.Our servers are deployed in over 1,100 networks including Tier 1 providers,medium and small ISPs,cable modem and satellite provi

108、ders,universities and other networks.We also deployour servers at smaller and medium-sized domestic and international ISPs through our Akamai AcceleratedNetwork Program.Under this program,we oer use of our servers to ISPs.In exchange,we typically do notpay for rack space to house our servers or band

109、width to deliver content from our servers to Internet users.Byhosting our servers,ISPs obtain access to popular content from the Internet that is served from our platform.As a result,when this content is requested by a user,the ISP does not need to pay for the bandwidth otherwisenecessary to retriev

110、e the content from the originating website.We monitor our platform through the NOCC,located at our corporate headquarters,with a back-upfacility on the West Coast.Expert network operations personnel sta the NOCC 24 hour per day,seven days aweek.We perform real-time monitoring of our own servers and

111、of the Internet to make certain that content isdelivered to users with the best possible performance and reliability.A key design principle of our system isthe use of a distributed network of servers with no single point of failure.As a result,if any computer,datacenter or portion of the Internet fa

112、ils,our services will continue operating.We constantly monitor theperformance of connections between various locations around the Internet and our regions using numeroustypes of network information to determine the performance of these connections.The result is a map of theoptimal Akamai region for

113、each location at that point in time.We rebuild this map periodically to reectchanging conditions.Our technology is designed so that our servers maintain redundancy with other servers in our network toensure the highest level of performance and reliability for our customers.This is increasingly impor

114、tant forreliably delivering the mission-critical content and applications of an enterprise over IP networks that,on theirown,are often unreliable.CustomersOur customer base is centered on enterprises.As of December 31,2002,customers who have adopted ourservices include many of the worlds leading ent

115、erprises,including American Suzuki Motor Corporation,Apple Computer,Inc.,Barnes&Noble,Best B,Inc.,Canon Japan,FedEx Corporation,GeneralMotors Corporation,L.L.Bean,Inc.,Microsoft Corporation,Molex Incorporated,NASDAQ,Sony MusicEntertainment Japan,Staples,Inc.,VeriSign,Inc.and VERITAS Software Corpora

116、tion.We have also begunto address the needs of the government market and,as of December 31,2002,had customers such as theCenters for Disease Control and Prevention,the U.S.Geological Surveys Earthquake Hazards Program andthe U.S.Government Printing Oce.For the year ended December 31,2000,Apple Compu

117、ter represented12%of total revenue.No customer accounted for 10%or more of total revenue for the years endedDecember 31,2001 or December 31,2002.Sales,Service and MarketingOur sales and service professionals are located in eleven oces in the United States with additionallocations in Europe and Japan

118、.We market and sell our services and software domestically and internationallythrough our direct sales and services organization and through more than 20 active resellers including Digex,Inc.,Electronic Data Systems Corporation,or EDS,International Business Machines Corporation,or IBM,InterNap Netwo

119、rk Services Corporation,Telefonica Group and others.Our sales and support organizationincludes employees in direct and channel sales,professional services,account management and technicalconsulting.As of December 31,2002,we had approximately 167 employees in our sales and supportorganization,includi

120、ng 62 direct sales representatives whose performance is measured on the basis of5achievement of quota objectives.Our ability to achieve signicant revenue growth in the future will depend inlarge part on how successfully we recruit,train and retain sucient direct sales,technical and global servicespe

121、rsonnel,and how well we establish and maintain relationships with our strategic partners.We believe thatthe complexity of our services will require a number of highly trained global sales and services personnel.To support our sales eorts and promote the Akamai name,we conduct comprehensive marketing

122、programs.Our marketing strategies include an active public relations campaign,print advertisements,onlineadvertisements,trade shows,strategic partnerships and on-going customer communication programs.As ofDecember 31,2002,we had 29 employees in our global marketing organization.Research and Developm

123、entOur research and development organization is continuously enhancing and improving our existingservices,strengthening our network and creating new services in response to our customers needs and marketdemand,as described in Our Solutions and The Akamai Platform above.As of December 31,2002,wehad a

124、pproximately 152 employees in our research and development organization,many of whom holdadvanced degrees in their eld.Our research and development expenses were$21.8 million,$44.8 million and$38.2 million for the years ended December 31,2002,2001 and 2000,respectively.CompetitionThe market for our

125、services remains relatively new,intensely competitive and characterized by rapidlychanging technology,evolving industry standards and frequent new product and service installations.Weexpect competition for our services to increase both from existing competitors and new market entrants.Wecompete prim

126、arily on the basis of:performance of services and software;reduced infrastructure complexity;ease of implementation and use of service;scalability;customer support;and return on investment in terms of cost savings and new revenue opportunities for our customers.We compete primarily with companies oe

127、ring products and services that address Internet performanceproblems,including companies that provide Internet content delivery and hosting services,streaming contentdelivery services and equipment-based solutions to Internet performance problems,such as load balancers andserver switches.Some of the

128、se companies resell our services.We also compete with companies that hostonline conferences using proprietary conferencing applications.We do not believe that any other companycurrently oers the range of solutions that we oer through our EdgeSuite service.Proprietary Rights and LicensingOur success

129、and ability to compete are dependent on our ability to develop and maintain the proprietaryaspects of our technology and operate without infringing on the proprietary rights of others.We rely on acombination of patent,trademark,trade secret and copyright laws and contractual restrictions to protect

130、theproprietary aspects of our technology.We currently have numerous issued United States patents covering ourcontent delivery technology,and we have numerous additional patent applications pending.In October 1998,we entered into a license agreement with the Massachusetts Institute of Technology,or M

131、IT,under which wewere granted a royalty-free,worldwide right to use and sublicense the intellectual property rights of MITunder various patent applications and copyrights relating to Internet content delivery technology.Two of thesepatent applications have now issued.We seek to limit disclosure of o

132、ur intellectual property by requiringemployees and consultants with access to our proprietary information to execute condentiality agreementswith us and by restricting access to our source code.6To enforce our intellectual property rights,we have led a number of lawsuits against certain of ourcompet

133、itors.Additional litigation may be necessary in the future to protect our rights.In addition,weaggressively defend our technology and business against claims of infringement or invalidity brought by others.For a further discussion of this litigation,see Note 10 to our consolidated nancial statements

134、 appearingelsewhere in this annual report on Form 10-K.There can be no assurance that our means of protecting ourproprietary rights will be adequate or that our competitors will not independently develop similar technology.Any failure by us to meaningfully protect our property could have a material

135、adverse eect on our business,operating results and nancial condition.See Factors Aecting Future Operating Results.EmployeesAs of December 31,2002,we had a total of 567 full-time and part-time employees.Our future successwill depend in part on our ability to attract,retain and motivate highly qualied

136、 technical and managementpersonnel for whom competition is intense.Our employees are not represented by any collective bargainingunit.We believe our relations with our employees are good.Factors Aecting Future Operating ResultsThe following important factors,among other things,could cause our actual

137、 operating results to diermaterially from those indicated or suggested by forward-looking statements made in this annual report onForm 10-K or presented elsewhere by management from time to time.Failure to increase our revenue and keep our expenses consistent with revenues could prevent us fromachie

138、ving and maintaining protability or cause us to miss debt payments.We have never been protable.We have incurred signicant losses since inception and expect to continueto incur losses in the future.We have large xed expenses,and we expect to continue to incur signicantbandwidth,sales and marketing,pr

139、oduct development,administrative,interest and other expenses.Therefore,we will need to generate signicantly higher revenue to achieve and maintain protability.There are numerousfactors that could impede our ability to increase revenue and moderate expenses,including:any lack of market acceptance of

140、our services due to continuing concerns about commercial use of theInternet,including security,reliability,speed,cost,ease of access,quality of service and regulatoryinitiatives;any failure of our current and planned services and software to operate as expected;a failure by us to respond rapidly to

141、technological changes in our industry which could cause ourservices to become obsolete;a continuation of adverse economic conditions worldwide that have contributed to slowdowns in capitalexpenditures by businesses,particularly capital spending in the IT market;failure of a signicant number of custo

142、mers to pay our fees on a timely basis or at all or to continue topurchase our services in accordance with their contractual commitments;and inability to attract high-quality customers to purchase and implement our current and planned servicesand software.Our failure to signicantly increase our reve

143、nue would seriously harm our business and operating results andcould cause us to fail to make interest or principal payments on our outstanding indebtedness.We have signicant long-term debt,and we may not be able to make interest or principal paymentswhen due.As of December 31,2002,our total long-te

144、rm debt was approximately$301.0 million and ourstockholders decit was$168.1 million.Our 51/2%convertible subordinated notes due 2007,which we refer toas our 51/2%notes,do not restrict our ability or our subsidiaries ability to incur additional indebtedness,7including debt that ranks senior to the 51

145、/2%notes.Our ability to satisfy our obligations will depend upon ourfuture performance,which is subject to many factors,including factors beyond our control.The conversionprice for the 51/2%notes is$115.47 per share.The current market price for shares of our common stock issignicantly below the conv

146、ersion price of our convertible subordinated notes.If the market price for ourcommon stock does not exceed the conversion price,the holders of the notes are unlikely to convert theirsecurities into common stock.Historically,we have had negative cash ow from operations.For the year ended December 31,

147、2002,netcash used in operating activities was approximately$65.8 million.Annual interest payments on ourdebentures,assuming no securities are converted or redeemed,is approximately$16.5 million.Unless we areable to generate sucient operating cash ow to service the notes,we will be required to raise

148、additional fundsor default on our obligations under the debentures and notes.If we are required to seek additional funding,such funding may not be available on acceptable terms orat all.If our revenue grows more slowly than we anticipate or if our operating expenses increase more than weexpect or ca

149、nnot be reduced in the event of lower revenue,we may need to obtain funding from outsidesources.If we are unable to obtain this funding,our business would be materially and adversely aected.Inaddition,even if we were to nd outside funding sources,we might be required to issue securities with greater

150、rights than the securities we have outstanding today.We might also be required to take other actions thatcould lessen the value of our common stock,including borrowing money on terms that are not favorable to us.The markets in which we operate are highly competitive and we may be unable to compete s

151、uccessfullyagainst new entrants and established companies with greater resources.We compete in markets that are new,intensely competitive,highly fragmented and rapidly changing.Wehave experienced and expect to continue to experience increased competition.Many of our currentcompetitors,as well as a n

152、umber of our potential competitors,have longer operating histories,greater namerecognition,broader customer relationships and industry alliances and substantially greater nancial,technicaland marketing resources than we do.Our competitors may be able to respond more quickly than we can tonew or emer

153、ging technologies and changes in customer requirements.Some of our current or potentialcompetitors may bundle their services with other services,software or hardware in a manner that maydiscourage website owners from purchasing any service we oer or ISPs from installing our servers.Increasedcompetit

154、ion could result in price and revenue reductions,loss of customers and loss of market share,whichcould materially and adversely aect our business,nancial condition and results of operations.If the prices we charge for our services decline over time,our business and nancial results are likely tosuer.

155、We expect that the prices we charge for our services may decline over time as a result of,among otherthings,existing and new competition in the markets we address.Consequently,our historical revenue ratesmay not be indicative of future revenue based on comparable trac volumes.If we are unable to sel

156、l ourservices at acceptable prices relative to our costs,our revenue and gross margins will decrease,and ourbusiness and nancial results will suer.Any unplanned interruption in our network or services could lead to signicant costs and disruptions thatcould reduce our revenue and harm our business,na

157、ncial results and reputation.Our business is dependent on providing our customers with fast,ecient and reliable Internet distributionapplication and content delivery services.For our core services,we currently provide a guarantee that ournetworks will deliver Internet content 24 hours a day,seven da

158、ys a week,365 days a year.If we do not meetthis standard,our customer does not pay for all or a part of its services on that day.Our network or servicescould be disrupted by numerous things,including,among other things,natural disasters,failure or refusal ofour third party network providers to provi

159、de the capacity,power losses,and intentional disruptions of our8services,such as disruptions caused by software viruses or attacks by hackers.Any widespread loss orinterruption of our network or services would reduce our revenue and could harm our business,nancial resultsand reputation.We may have i

160、nsucient transmission capacity which could result in interruptions in our services andloss of revenues.Our operations are dependent in part upon transmission capacity provided by third-party telecommunica-tions network providers.We believe that we have access to adequate capacity to provide our serv

161、ices;however,there can be no assurance that we are adequately prepared for unexpected increases in bandwidth demands byour customers.In addition,the bandwidth we have contracted to purchase may become unavailable for avariety of reasons.For example,a number of these network providers have recently l

162、ed for protection underthe federal bankruptcy laws.As a result,there is uncertainty about whether such providers or others that enterinto bankruptcy will be able to continue to provide services to us.Any failure of these network providers toprovide the capacity we require,due to nancial or other rea

163、sons,may result in a reduction in,or interruptionof,service to our customers.If we do not have access to third-party transmission capacity,we could losecustomers.If we are unable to obtain transmission capacity on terms commercially acceptable to us,ourbusiness and nancial results could suer.In addi

164、tion,our telecommunications and network providerstypically provide rack space for our servers.Damage or destruction of,or other denial of access to,a facilitywhere our servers are housed could result in a reduction in,or interruption of,service to our customers.Because our services are complex and a

165、re deployed in complex environments,they may have errors ordefects that could seriously harm our business.Our services are highly complex and are designed to be deployed in and across numerous large andcomplex networks.From time to time,we have needed to correct errors and defects in our software.In

166、 thefuture,there may be additional errors and defects in our software that may adversely aect our services.If weare unable to eciently x errors or other problems that may be identied,we could experience loss ofrevenues and market share,damage to our reputation,increased expenses and legal actions by

167、 our customers.If the estimates we make,and the assumptions on which we rely,in preparing our nancial statementsprove inaccurate,our actual results may vary from these reected in our projections and accruals.Our nancial statements have been prepared in accordance with accounting principles generally

168、 acceptedin the United States of America.The preparation of these nancial statements requires us to make estimatesand judgments that aect the reported amounts of our assets,liabilities,revenues and expenses,the amountsof charges accrued by us,such as those made in connection with our restructurings,

169、and related disclosure ofcontingent assets and liabilities.We base our estimates on historical experience and on various otherassumptions that we believe to be reasonable under the circumstances.There can be no assurance,however,that our estimates,or the assumptions underlying them,will be correct.A

170、s a result,our actual results couldvary from those reected in our projections and accruals,which could adversely aect our stock price.Our business involves numerous risks and uncertainties that aect the trading price of our commonstock,which could result in litigation against us.The price of our com

171、mon stock has been and likely will continue to be subject to substantial uctuations.The following factors may contribute to the instability of our stock price:variations in our quarterly operating results;the addition or departure of our key personnel;announcements by us or our competitors of signic

172、ant contracts,litigation developments,or new orenhanced products or service oerings;changes in nancial estimates by securities analysts;9 our sales of common stock or other securities in the future;changes in market valuations of networking,Internet and telecommunications companies;uctuations in sto

173、ck market prices and volumes;and changes in general economic conditions,including interest rate levels.Class action litigation is often brought against companies following periods of volatility in the market price oftheir common stock.If such litigation were brought against us,it could be expensive

174、and divert ourmanagements attention and resources that could materially adversely aect our business and results ofoperations.If our license agreement with MIT terminates,our business could be adversely aected.We have licensed from MIT technology covered by various patent applications and copyrights

175、relating toInternet content delivery technology.Some of our technology is based in part on the technology covered bythese patent applications and copyrights.Our license is eective for the life of the patent and patentapplications;however,under limited circumstances,such as a cessation of our operati

176、ons due to our insolvencyor our material breach of the terms of the license agreement,MIT has the right to terminate our license.Atermination of our license agreement with MIT could have a material adverse eect on our business.We could incur substantial costs defending our intellectual property from

177、 infringement or a claim ofinfringement.Other companies or individuals,including our competitors,may obtain patents or other proprietary rightsthat would prevent,limit or interfere with our ability to make,use or sell our services.As a result,we may befound to infringe the proprietary rights of othe

178、rs.In the event of a successful claim of infringement against usand our failure or inability to license the infringed technology,our business and operating results would besignicantly harmed.Companies in the Internet market are increasingly bringing suits alleging infringement oftheir proprietary ri

179、ghts,particularly patent rights.We have been named as a defendant in several lawsuitsalleging that we have violated other companies intellectual property rights.Any litigation or claims,whetheror not valid,could result in substantial costs and diversion of resources and require us to do one or more

180、of thefollowing:cease selling,incorporating or using products or services that incorporate the challenged intellectualproperty;obtain a license from the holder of the infringed intellectual property right,which license may not beavailable on reasonable terms or at all;and redesign products or servic

181、es.If we are forced to take any of these actions,our business may be seriously harmed.Our business will be adversely aected if we are unable to protect our intellectual property rights fromthird-party challenges.We rely on a combination of patent,copyright,trademark and trade secret laws and restric

182、tions ondisclosure to protect our intellectual property rights.These legal protections aord only limited protection.Monitoring unauthorized use of our services is dicult and we cannot be certain that the steps we have takenwill prevent unauthorized use of our technology,particularly in foreign count

183、ries where the laws may notprotect our proprietary rights as fully as in the United States.Although we have licensed and proprietarytechnology covered by patents,we cannot be certain that any such patents will not be challenged,invalidatedor circumvented.Furthermore,we cannot be certain that any pen

184、ding or future patent applications will begranted,that any future patent will not be challenged,invalidated or circumvented,or that rights grantedunder any patent that may be issued will provide competitive advantages to us.10If we are unable to retain our key employees and hire qualied sales and te

185、chnical personnel,our abilityto compete could be harmed.Our future success depends upon the continued services of our executive ocers and other keytechnology,sales,marketing and support personnel who have critical industry experience and relationshipsthat they rely on in implementing our business pl

186、an.None of our ocers or key employees is bound by anemployment agreement for any specic term.We have a key person life insurance policy covering only thelife of F.Thomson Leighton.The loss of the services of any of our key employees could delay the developmentand introduction of and negatively impac

187、t our ability to sell our services.We face risks associated with international operations that could harm our business.We have expanded our international operations to Japan,Germany,England and France.In addition,weare part of a joint venture in Australia.We expect to continue to expand our sales an

188、d support organizationsinternationally.Therefore,we expect to commit signicant resources to expand our international sales andmarketing activities.We are increasingly subject to a number of risks associated with international businessactivities that may increase our costs,lengthen our sales cycle an

189、d require signicant management attention.These risks include:lack of market acceptance of our products and services abroad;increased expenses associated with marketing services in foreign countries;general economic conditions in international markets;currency exchange rate uctuations;unexpected chan

190、ges in regulatory requirements resulting in unanticipated costs and delays;taris,export controls and other trade barriers;longer accounts receivable payment cycles and diculties in collecting accounts receivable;and potentially adverse tax consequences.As part of our business strategy,we have entere

191、d into and may enter into or seek to enter into businesscombinations and acquisitions that may be dicult to integrate,disrupt our business,dilute stockholdervalue or divert management attention.We have made acquisitions of other companies in the past and may enter into additional businesscombination

192、s and acquisitions in the future.Acquisitions are typically accompanied by a number of risks,including the diculty of integrating the operations and personnel of the acquired companies,the potentialdisruption of our ongoing business,the potential distraction of management,expenses related to theacqu

193、isition and potential unknown liabilities associated with acquired businesses.If we are not successful incompleting acquisitions that we may pursue in the future,we may be required to reevaluate our businessstrategy,and we may have incurred substantial expenses and devoted signicant management time

194、andresources without a productive result.In addition,with future acquisitions,we could use substantial portions ofour available cash or make dilutive issuances of securities.Future acquisitions or attempted acquisitions couldhave an adverse eect on our ability to become protable.Internet-related law

195、s could adversely aect our business.Laws and regulations that apply to communications and commerce over the Internet are becoming moreprevalent.In particular,the growth and development of the market for online commerce has prompted callsfor more stringent tax,consumer protection and privacy laws,bot

196、h in the United States and abroad,that mayimpose additional burdens on companies conducting business online.This could negatively aect thebusinesses of our customers and reduce their demand for our services.We could also be negatively aected bytax laws that might apply to our servers which are locat

197、ed in many dierent jurisdictions.Internet-relatedlaws,however,remain largely unsettled,even in areas where there has been some legislative action.The11adoption or modication of laws or regulations relating to the Internet or our operations,or interpretations ofexisting law,could adversely aect our b

198、usiness.Terrorist activities and resulting military and other actions could adversely aect our business.Terrorist attacks in New York,Pennsylvania and Washington,D.C.in September 2001 disruptedcommerce throughout the United States and other parts of the world.The continued threat of terrorism within

199、the United States and abroad,and the potential for military action and heightened security measures inresponse to such threat,may cause signicant disruption to commerce throughout the world.To the extentthat such disruptions result in delays or cancellations of customer orders,a general decrease in

200、corporatespending on information technology,or our inability to eectively market,sell or operate our services andsoftware,our business and results of operations could be materially and adversely aected.Provisions of our charter documents,our stockholder rights plan and Delaware law may have anti-tak

201、eover eects that could prevent a change in control even if the change in control would be benecialto our stockholders.Provisions of our amended and restated certicate of incorporation,by-laws and Delaware law couldmake it more dicult for a third party to acquire us,even if doing so would be benecial

202、 to our stockholders.In addition,in September 2002,our Board of Directors adopted a shareholder rights plans the provisions ofwhich could make it more dicult for a potential acquirer of Akamai to consummate an acquisitiontransaction.A class action lawsuit has been led against us that may be costly t

203、o defend and the outcome of which isuncertain and may harm our business.We are named as a defendant in a purported class action lawsuit led in 2001 alleging that theunderwriters of our initial public oering received undisclosed compensation in connection with our IPO inviolation of the Securities Ac

204、t of 1933 and the Securities Exchange Act of 1934.This litigation could beexpensive and divert the attention of our management and other resources.We can provide no assurance as tothe outcome of this action.Any conclusion of these matters in a manner adverse to us could have a materialadverse aect o

205、n our nancial position and results of operations.We may become involved in other litigation that may adversely aect us.In the ordinary course of business,we may become involved in litigation,administrative proceedings andgovernmental proceedings.Such matters can be time-consuming,divert managements

206、attention and re-sources and cause us to incur signicant expenses.Furthermore,there can be no assurance that the results ofany of these actions will not have a material adverse eect on our business,results of operations or nancialcondition.Item 2.PropertiesOur headquarters are located in approximate

207、ly 89,000 square feet of leased oce space in Cambridge,Massachusetts.Our primary west coast oce is located in approximately 47,000 square feet of leased ocespace in San Mateo,California.We are attempting to sublease a substantial portion of our San Mateo facility.We maintain oces in several other lo

208、cations in the United States,including in or near each of Los Angeles,California;Atlanta,Georgia;Chicago,Illinois;New York,New York;Fairfax,Virginia and Seattle,Washington.We also maintain oces in Europe and Asia including in or near Munich,Germany;Paris,France;London,England;and Tokyo,Japan.All of

209、our facilities are leased.Item 3.Legal ProceedingsWe are subject to legal proceedings,claims and litigation arising in the ordinary course of business.Wedo not expect the ultimate costs to resolve these matters to have a material adverse eect on our consolidatednancial position,results of operations

210、 or cash ows.12Between July 2,2001 and August 31,2001,purported class action lawsuits seeking monetary damageswere led in the United States District Court for the Southern District of New York against us and several ofour ocers and directors as well as against the underwriters of our October 28,1999

211、 initial public oering ofcommon stock.The complaints were led allegedly on behalf of persons who purchased our common stockduring dierent time periods,all beginning on October 28,1999 and ending on various dates.The complaintsare similar and allege violations of the Securities Act of 1933 and the Se

212、curities Exchange Act of 1934primarily based on the allegation that the underwriters received undisclosed compensation in connection withour initial public oering.On April 19,2002,a single consolidated amended complaint was led,reiterating inone pleading the allegations contained in the previously l

213、ed separate actions.The consolidated amendedcomplaint denes the alleged class period as October 28,1999 through December 6,2000.On July 15,2002,we joined in an omnibus motion to dismiss led by all issuer defendants named in similar actions whichchallenges the legal suciency of the plaintis claims,in

214、cluding those in the consolidated amendedcomplaint.Plaintis opposed the motion,and the Court heard oral arguments on the motion in November2002.On February 19,2003,the Court ruled against us on this motion,and the case may now proceed todiscovery.In addition,in October 2002,the plaintis dismissed wi

215、thout prejudice all of the individualdefendants from the consolidated complaint.Although we believe that we have meritorious defenses to theclaims made in the complaint,an adverse resolution of the action could have a material adverse eect on ournancial condition and results of operations in the per

216、iod in which the lawsuit is resolved.We are not presentlyable to estimate potential losses,if any,related to this lawsuit.In June 2002,we led suit against Speedera Networks,Inc.,or Speedera,in California Superior Courtalleging theft of Akamai trade secrets from an independent company that provides w

217、ebsite performancetesting services.In connection with this suit,in September 2002,the Court issued a preliminary injunction torestrain Speedera from continuing to access our condential information from the independent companysdatabase and from using any data obtained from such access.In October 2002

218、,Speedera led a cross-claimagainst us seeking monetary damages and injunctive relief and alleging that we engaged in various unfair tradepractices,made false and misleading statements and engaged in unfair competition.We believe that we havemeritorious defenses to the claims made in Speederas cross-

219、claim and intend to contest the allegationsvigorously;however,there can be no assurance that we will be successful.We are not presently able toreasonably estimate potential losses,if any,related to this cross-claim.In July 2002,Cable and Wireless Internet Services,or C&W,formerly known as Digital Is

220、land,led suitagainst us in the United States District Court for the District of Massachusetts alleging that certain Akamaiservices infringe a C&W patent issued in that month.C&W is seeking a preliminary injunction restraining usfrom oering services that infringe such patent.Subsequently,in August 20

221、02,C&W led a suit against us inthe United States District Court for the Northern District of California alleging that certain Akamai servicesinfringe a second C&W patent.We believe that we have meritorious defenses to the claims made in thecomplaints and intend to contest the lawsuits vigorously;how

222、ever,there can be no assurance that we will besuccessful.We are not presently able to reasonably estimate potential losses,if any,related to these lawsuits.In September 2002,Teknowledge Corporation,or Teknowledge,led suit in the United States DistrictCourt for the District of Delaware against Akamai

223、,C&W and Inktomi Corporation alleging that certainservices oered by each company infringe a Teknowledge patent relating to automatic retrieval of changedles by a network software agent.We believe that we have meritorious defenses to the claims made in thecomplaint and intend to contest the lawsuit v

224、igorously;however,there can be no assurance that we will besuccessful.We are not presently able to reasonably estimate potential losses,if any,related to this lawsuit.In November 2002,we led suit against Speedera in federal court in Massachusetts for infringement of apatent held by Akamai.In January

225、 2003,Speedera led a counterclaim in this case alleging that Akamai hasinfringed a patent that was recently issued to Speedera.We believe that we have meritorious defenses to theclaims made in the counterclaim and intend to contest them vigorously;however,there can be no assurancethat we will be suc

226、cessful.We are not presently able to reasonably estimate potential losses,if any,related tothis counterclaim.13Item 4.Submission of Matters to a Vote of Security HoldersNone.PART IIItem 5.Market For Registrants Common Equity and Related Stockholder MattersOur common stock trades under the symbol AKA

227、M.Our common stock has been listed on TheNASDAQ SmallCap Market since September 3,2002.From the time that public trading of our commonstock commenced on October 29,1999 until September 3,2002,our common stock was listed on TheNASDAQ National Market.Prior to October 29,1999,there was no public market

228、 for our common stock.The following table sets forth,for the periods indicated,the high and low sale price per share of the commonstock on The NASDAQ National Market and The NASDAQ SmallCap Market,as applicable:HighLowYear Ended December 31,2001:First Quarter$37.44$7.22Second Quarter$13.34$5.50Third

229、 Quarter$9.33$2.52Fourth Quarter$6.75$2.62HighLowYear Ended December 31,2002:First Quarter$6.34$3.05Second Quarter$4.44$0.76Third Quarter$1.55$0.75Fourth Quarter$2.75$0.56As of March 24,2003,there were 582 holders of record of our common stock.We have never paid or declared any cash dividends on sha

230、res of our common stock or other securities anddo not anticipate paying any cash dividends in the foreseeable future.We currently intend to retain all futureearnings,if any,for use in the operation of our business.Item 6.Selected Financial DataThe following selected consolidated nancial data should

231、be read in conjunction with our consolidatednancial statements and related notes and with Managements Discussion and Analysis of FinancialCondition and Results of Operations and other nancial data included elsewhere in this annual report onForm 10-K.The statement of operations data and balance sheet

232、 data for all periods presented is derived fromaudited consolidated nancial statements included elsewhere in this annual report on Form 10-K or on lewith the Securities and Exchange Commission.We acquired several businesses in 2000 that were recordedunder the purchase method of accounting.We allocat

233、ed$3 billion of the cost of these acquisitions to goodwilland other intangible assets.As a result,loss from operations for the years ended December 31,2001 and 2000includes$256,000 and$676,000,respectively,for the amortization of goodwill and other intangible assetsrelated to these acquisitions.In 2

234、001,loss from operations includes a$1.9 billion impairment of goodwill.OnJanuary 1,2002,in accordance with Statement of Financial Accounting Standards No.142,Goodwill andOther Intangible Assets,we discontinued the amortization of goodwill.Loss from continuing operations forthe years ended December 3

235、1,2002 and 2001 includes restructuring charges of$45.8 million and$40.5 mil-14lion,respectively,for actual and estimated termination and modication costs related to non-cancelablefacility leases and employee severance.Period fromInception(August 20,1998)throughFor the Years Ended December 31,Decembe

236、r,3120022001200019991998(in thousands,except per share data)Consolidated Statements of Operations Data:Revenue$144,976$163,214$89,766$3,986$Total cost and operating expenses327,5122,577,112989,34860,424900Loss from continuing operations(204,437)(2,435,512)(885,785)(54,169)(890)Net loss(204,437)(2,43

237、5,512)(885,785)(57,559)(890)Net loss attributable to common stockholders(204,437)(2,435,512)(885,785)(59,800)(890)Basic and diluted net loss per share$(1.81)$(23.59)$(10.07)$(1.98)$(0.06)Weighted average common shares outstanding112,766103,23387,95930,17715,015As of December 31,20022001200019991998(

238、In thousands)Consolidated Balance Sheet Data:Cash,cash equivalents and marketable securities$111,765$181,514$373,300$269,554$6,805Restricted marketable securities13,40528,99713,634Working capital 60,584136,701270,396255,0266,157Total assets229,863421,4782,790,777300,8158,866Obligations under capital

239、 leases and equipment loans,netof current portion1,00611342173325Accrued restructuring,net of current portion13,99410,010Other liabilities 1,8542,8231,009Convertible subordinated notes 300,000300,000300,000Convertible preferred stock8,284Total stockholders(decit)equity$(168,090)$17,234$2,404,399$281

240、,445$(148)15Item 7.Managements Discussion and Analysis of Financial Condition and Results of OperationsOverviewThe following sets forth,as a percentage of revenue,consolidated statements of operations data for theyears indicated:200220012000Revenue 100%100%100%Cost of revenue 596680Research and deve

241、lopment 152843Sales and marketing 4557124General and administrative6875101Amortization of other intangible assets81114Amortization of goodwill145739Restructuring charges 3125Impairment of goodwill1,172Acquired in-process research and development 1Total cost and operating expenses 2261,5791,102Loss f

242、rom operations(126)(1,479)(1,002)Interest income2725Interest expense(13)(11)(10)Other income 1Loss on investments,net(4)(9)Loss before provision for income taxes(141)(1,491)(987)Provision for income taxes 1Net loss(141)%(1,492)%(987)%Since our inception,we have incurred signicant costs to develop ou

243、r technology,build our worldwidenetwork,sell and market our services and software and support our operations.We have also incurredsignicant amortization expense and impairments of goodwill and other intangible assets from the acquisitionof businesses.In recent years,we have incurred signicant restru

244、cturing expenses related to employeeseverance payments and vacated facilities under long-term leases.Since our inception,we have incurredsignicant losses and negative cash ows from operations.We have not achieved protability on a quarterly orannual basis,and we anticipate that we will continue to in

245、cur net losses over at least the next 12 to 18 months.As of December 31,2002,we had$300 million of convertible notes outstanding,which become due in 2007.We ended the year with cash and marketable securities of$125.2 million,of which$13.4 million is subject torestrictions limiting our ability to wit

246、hdraw or otherwise use such cash.We believe that our success is dependent on increasing our net monthly recurring revenue,developingnew services and software that leverage our proprietary technology and achieving and maintaining a properalignment between our revenue and our cost structure.We conside

247、r net additions to monthly recurringrevenue to be a critical success factor for our business.We dene net monthly recurring revenue as newbookings of recurring revenue less lost recurring revenue due to customer cancellations,non-renewals orcollections issues.A typical recurring revenue contract has

248、a term of one to two years.As of December 31,2002,our net monthly recurring revenue under contract was greater than such amount at December 31,2001.We continue to sell our services and software into a depressed information technology market.We are alsoexperiencing competitive pricing pressures on ou

249、r service oerings.Due to these and other factors,our abilityto predict our future revenue results is limited,and there is no guarantee that net monthly recurring revenueunder contract will continue to increase.16Our ability to maintain gross margins that fall within our target range is also critical

250、 to our success.Accordingly,we are continuously managing our network costs by entering into competitively priced bandwidthand colocation contracts that are aligned with our revenue forecasts and our estimates as to the amount oftrac we expect to carry over our network.As a result,we have been succes

251、sful in maintaining our grossmargins despite pricing pressure on our service oerings.We have taken steps to align our recurring operating expenses with our revenue and gross margins.Ourrecurring operating expenses include research and development,sales and marketing and general andadministrative exp

252、enses.These expenses were$184.5 million for the year ended December 31,2002 comparedto$259.6 million for the year ended December 31,2001 and$239.7 million for the year ended December 31,2000.During the year ended December 31,2002,we undertook actions to reduce our overall cost structure,including em

253、ployee severances,while maintaining a high level of employee productivity and customer service.As a result,we expect the downward trend in these operating expenses to continue.Our operating expenses also include restructuring charges.We incurred restructuring charges of$45.8 million and$40.5 million

254、 during the years ended December 31,2002 and 2001,respectively.Theseexpenses relate to actual and estimated termination and modication costs on leases for excess facilities andemployee severance costs.We may incur restructuring charges in the future depending on several factors,including the timing

255、and amount of any lease modications and terminations,the timing and amount of anysublease receipts,and any future employee severances.We expect that,if successful,our eorts to terminateand modify our excess facility leases will require a signicant amount of cash in the future.Recent EventsIn October

256、 2002,we reduced our workforce by 29%,or approximately 200 employees,across allfunctional areas.Accordingly,we recorded a restructuring charge in the fourth quarter of 2002 of$3.6 millionfor one-time benet payments to aected employees.As a result of these actions,we expect operating costs todecline

257、in 2003 from previous levels.In November 2002,Robert Cobuzzi became our Chief Financial Ocer following the resignation of ourformer Chief Financial Ocer,Timothy Weller.In November 2002,we settled a stock price appreciation guarantee to CNN News Group,or CNN,bymaking a$2.7 million cash payment to CNN

258、 and allowing CNN to draw on a$3.8 million letter of creditpreviously issued by us.We acquired the obligation as part of our acquision of InterVu,Inc.in April 2000.Thesettlement was accounted for as an adjustment to the fair value of the common stock for the amount ofadditional cash issued.Consequen

259、tly,the total purchase price was not adjusted.In December 2002,we sold our 40%joint venture interest in Akamai Technologies Japan KK to SoftbankBroadmedia Corporation,or SBBM.Prior to the sale,SBBM had owned a 60%interest in AkamaiTechnologies Japan KK.We expect that SBBM will operate the entity as

260、a non-exclusive reseller of ourservices in Japan.As a result of the sale,we recorded a gain of$400,000 in loss on investments,net in theconsolidated statement of operations for the year ended December 31,2002.In January 2003,we formed anew wholly-owned subsidiary in Japan through which we sell our s

261、ervices and support our resellerarrangements.The results of operations,nancial position and cash ows of the new subsidiary will beconsolidated into our future quarterly and annual nancial statements.In January 2003,we paid$2.5 million,including interest,to a former employee of an acquired companyas

262、a result of an April 2001 judgment against the acquired company for breach of contract.We have includedthis amount in accrued expenses as of December 31,2002.In February 2003,we settled an employment-related lawsuit with multiple claims brought by a former employee for a cash payment of$3.6 million.

263、Ourinsurance carrier reimbursed us for$1.8 million of such settlement expense.As of December 31,2002,toreect this settlement,we have included$3.6 million in accrued expenses and$1.8 million in current assets,and we recorded the net amount of$1.8 million in general and administrative expenses.17Chang

264、e in Presentation of Consolidated Statement of Operations Expense CategoriesIn 2002,we modied the presentation of our consolidated statements of operations.All prior periodamounts have been reclassied to conform with current year presentation.These modications had no impacton loss from operations or

265、 net loss.We modied certain expense categories as follows:We included in cost of revenue the salaries,benets and other direct costs of employees who operateour network.These costs were previously included under the engineering and development category.We disaggregated our sales,general and administr

266、ative category into two categories:sales andmarketing and general and administrative.We moved internal information technology and network operation costs from engineering anddevelopment to general and administrative and cost of revenue,respectively.Our engineering and development organization became

267、 known as our research and developmentorganization.In addition,we simplied the presentation of the consolidated statement of operations as follows:We included equity-related compensation in cost of revenue,research and development,sales andmarketing and general and administrative based on the functi

268、onal role of the related employee.We included the depreciation and amortization on our network equipment and internal-use softwareused to deliver our services in cost of revenue.We included the depreciation and amortization of all other property and equipment in general andadministrative.Application

269、 of Critical Accounting Policies and EstimatesOverviewOur discussion and analysis of our nancial condition and results of operations are based upon ourconsolidated nancial statements,which have been prepared by us in accordance with accounting principlesgenerally accepted in the United States of Ame

270、rica.The preparation of these consolidated nancialstatements requires us to make estimates and judgments that aect the reported amounts of assets,liabilities,revenues and expenses,and related disclosure of contingent assets and liabilities.Our estimates include thoserelated to revenue recognition,al

271、lowance for doubtful accounts,investments,intangible assets,income taxes,depreciable lives of property and equipment,restructuring accruals and contingent obligations.We base ourestimates on historical experience and on various other assumptions that we believe to be reasonable under thecircumstance

272、s.Actual results may dier from these estimates.For a complete description of our accountingpolicies,see Note 2 to our consolidated nancial statements included in this annual report on Form 10-K.DenitionsWe dene our critical accounting policies as those accounting principles generally accepted in the

273、United States of America,and the specic manner that we apply those principals,that require us to makecritical accounting estimates about matters that are uncertain and have a material impact on our nancialposition and results of operations.We dene a critical accounting estimate as an estimate that r

274、equires us tomake assumptions about matters that are highly uncertain at the time the accounting estimate is made andeither the estimate is derived from a range of potential outcomes or changes in the estimate would have amaterial impact on our nancial condition or results of operations.18Review of

275、Critical Accounting Policies and EstimatesRevenue Recognition:We recognize revenue from our services when:an enforceable arrangement to deliver the service has been established;the service or license has been delivered to and accepted(when applicable)by the customer;the fee for the service or licens

276、e is xed or determinable;and collection is reasonably assured.At the inception of a customer contract,we make a critical estimate as to whether collection is reasonablyassured.We base our estimate on the successful completion of a credit check,nancial review or the receipt ofa deposit from the custo

277、mer.Upon the completion of these steps,we recognize revenue monthly in accordancewith our revenue recognition policy,assuming the other criteria are met.If we subsequently determine thatcollection is not reasonably assured,we cease recognizing revenue until cash is received.We also record anallowanc

278、e for doubtful accounts and bad debt expense for all other unpaid invoices for the related customer.Changes in our estimates of whether collection is reasonably assured would change the amount of revenue orbad debt expense that we recognize.Concurrent Transactions:From time to time,we enter into con

279、tracts to sell our services or license our technology with an enterpriseat or about the same time we enter into contracts to purchase products or services from the same enterprise.Ifwe conclude that these contracts were negotiated concurrently,we record as revenue only the net cashreceived from the

280、vendor,unless the fair value to us of the vendors product or service can be establishedobjectively and realization of such value is assumed probable.Investments:We periodically review all investments for reduction in fair value that is other-than-temporary.Weconsider several factors that may trigger

281、 an other-than-temporary decline in value,such as the length of timethe investments value has been below cost and the nancial results of the entity in which we invest.When weconclude that the reduction is other-than-temporary,the cost of the investment is adjusted to its fair valuethrough a charge t

282、o loss on investments on the consolidated statement of operations.Changes in our judgmentas to whether a reduction in the value of an investment is other-than-temporary would increase loss oninvestments.Impairment and Useful Lives of Long-Lived Assets:We review our long-lived assets,such as xed asse

283、ts and intangible assets,for impairment wheneverevents or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.Events that would trigger an impairment review include a change in the use of the asset or forecasted negativecash ows related to the asset.When s

284、uch a triggering event occurs,we compare the carrying amount of thelong-lived asset to the undiscounted expected future cash ows related to the asset.If the carrying amount isgreater than the sum of the undiscounted cash ows,we adjust the asset to its fair value through animpairment charge included

285、in loss from operations.We determine fair value based upon a quoted marketprice or a discounted cash ow analysis.The critical accounting estimates required for this accounting policyinclude forecasted usage of the long-lived assets and the useful lives of these assets.Changes in theseestimates could

286、 increase loss from operations materially.Restructuring Liabilities Related to Facility Leases:When we vacate a facility subject to a non-cancelable long-term lease,we record a restructuring liabilityfor either the estimated costs to terminate the lease or the estimated costs that will continue to b

287、e incurred19under the lease for its remaining term where there is no economic benet to us.In the latter case,we measurethe amount of the restructuring liability as the amount of contractual future lease payments reduced by anestimate of sublease income.To date,we have recorded a restructuring liabil

288、ity when our managementapproves and commits us to a plan to terminate a lease,the plan specically identies the actions to be taken,and the actions are scheduled to begin soon after management approves the plan.Beginning in 2003,inaccordance with a newly adopted accounting standard,we will record a r

289、estructuring liability,discounted atthe appropriate rate,for a facility lease only when we have both vacated the space and completed all actionsneeded to make the space readily available for sublease.When we record a restructuring liability,we make critical estimates related to the amount of rent or

290、termination costs that we will pay and the amount of sublease income that we will receive related to the vacantproperty.As of December 31,2002,we had$37.5 million in accrued restructuring liabilities related to vacatedfacilities.Our estimates are based,in part,on the most recent negotiations with th

291、e landlords of theseproperties and current market conditions.We expect that approximately$23.6 million of the amount accruedas of December 31,2002 will be paid within twelve months.Should the actual amounts or the timing ofrestructuring payments dier from our estimate,we would adjust the restructuri

292、ng liability through a charge orbenet to restructuring charges on the consolidated statement of operations.If we are not able to successfullymodify these leases,the total contractual payout for these properties would be approximately$64.0 millionover the next seven years.If we are not successful in

293、subleasing these facilities,the total incrementalrestructuring charge would be approximately$27.0 million.Loss Contingencies:We dene a loss contingency as a condition involving uncertainty as to a possible loss related to a previousevent that will not be resolved until one or more future events occu

294、r or fail to occur.Our primary losscontingencies relate to pending or threatened litigation and the collectibility of accounts receivable.We recorda liability for a loss contingency when we believe that it is probable that a loss has been incurred and theamount of the loss can be reasonably estimate

295、d.When we believe the likelihood of a loss is less than probableand more than remote,we do not record a liability but we disclose material loss contingencies in the notes tothe consolidated nancial statements.Valuation Allowance for Deferred Taxes:We provide a valuation allowance against our deferre

296、d tax assets when,based on the weight of availableevidence,it is more likely than not that some or all of the deferred tax assets will not be realized.A change inour estimate of the future realization of deferred tax assets would result in a material income tax benet.Capitalization of Internal-Use S

297、oftware Costs:We capitalize the salaries and payroll-related costs of employees who devote time to the applicationdevelopment stage of internal-use software projects.If the project is an enhancement to previously developedsoftware,we must assess whether the enhancement is signicant and creates addit

298、ional functionality to thesoftware,thus qualifying the work incurred during the application development stage for capitalization.Wemust gather employee data for the amount of time incurred during the application development phase.Oncethe project is complete,we must estimate the useful life of the in

299、ternal-use software,and we must periodicallyassess whether the software is impaired.Changes in our estimates related to internal-use software wouldincrease or decrease operating expenses or amortization recorded in during the period.Results of OperationsRevenue.Total revenue decreased 11%,or$18.2 mi

300、llion,to$145.0 million for the year endedDecember 31,2002 as compared to$163.2 million for the year ended December 31,2001.Total revenue was$89.8 million for the year ended December 31,2000.For 2002 and 2001,no single customer accounted formore than 10%of revenue.For 2000,one customer,Apple Computer

301、,accounted for 12%of our total revenue.For 2002,13%of our revenue was derived from our operations located outside of the United States.For 200120and 2000,less than 10%of our total revenue was derived from our operations located outside of the UnitedStates.Service revenue decreased 5%,or$6.7 million,

302、to$128.7 million for the year ended December 31,2002 ascompared to$135.3 million for the year ended December 31,2001.Service revenue was$81.0 million for theyear ended December 31,2000.The decrease in service revenue in 2002 as compared to 2001 was attributableto a decrease in customers under recurr

303、ing revenue contracts,partially oset by an increase in averagemonthly recurring revenue per customer.The increase in service revenue in 2001 compared to 2000 was due toan increase in customers under recurring revenue contracts.Although we have achieved positive net monthlyrecurring revenue during 20

304、02,we are not able to reasonably predict future service revenue given theuncertainty of competition,customer cancellations and the current macroeconomic environment.License and other revenue decreased 47%,or$5.9 million,to$6.5 million for the year endedDecember 31,2002 as compared to$12.4 million fo

305、r the year ended December 31,2001.License and otherrevenue was$5.7 million for the year ended December 31,2000.License and other revenue includes sales ofcustomized technology solutions sold as perpetual licenses or delivered under long-term contracts.Thedecrease in license and other revenue in 2002

306、 as compared to 2001 was attributable to a reduction in theamount of software and other technology licensed to customers.In contrast,we increased our license and otherrevenue in 2001 as compared to 2000,principally as a result of the introduction of our EdgeScape licenseoering in 2001.Service and li

307、cense revenue from related parties decreased 37%,or$5.6 million,to$9.8 million for theyear ended December 31,2002 as compared to$15.4 million for the year ended December 31,2001.Serviceand license revenue from related parties was$3.0 million for the year ended December 31,2000.The decreasein revenue

308、 from related parties between 2002 and 2001 was primarily attributable to the reduction in revenuefrom Sockeye Networks,Inc.,or Sockeye,as a result of a reduction in 2001 of Sockeyes minimum monthlyrevenue commitment and the cancellation in November 2002 of Sockeyes contract with us.The increase inr

309、evenue from related parties between 2001 and 2000 was primarily due to an increase in revenue from Sockeyecompared to the prior year.As a result of Sockeyes cancellation of its service agreement and the sale of ourequity interest in Akamai Technologies Japan KK,we do not expect signicant revenues fr

310、om related partiesin the future.Cost of Revenue.Cost of revenue includes fees paid to network providers for bandwidth and monthlyfees for housing our servers in third-party network data centers.Cost of revenue also includes networkoperation employee costs,cost of licenses,depreciation on the network

311、 equipment used to deliver our servicesand amortization of internal-use software costs.During the year ended December 31,2002,we capitalized$174,000 of payroll costs for network operations personnel related to the development of internal-use softwareused to operate and monitor our network.No payroll

312、 costs were capitalized in 2001 or 2000.Cost of revenue decreased 21%,or$23.0 million,to$85.3 million for the year ended December 31,2002compared to$108.3 million for the year ended December 31,2001.Cost of revenue was$72.2 million for theyear ended December 31,2000.Cost of revenue decreased in 2002

313、 as compared to 2001 primarily as a resultof a reduction in trac delivered over our network,lower bandwidth costs per unit and improved managementof our network trac.Cost of revenue increased in 2001 as compared to 2000 primarily as a result of anincrease in depreciation on network assets and an inc

314、rease in the amount of trac delivered over our network.21Cost of revenue is comprised of the following(in millions):For the Year EndedDecember 31,200220012000Bandwidth,co-location and storage$32.3$55.1$42.0Network operations personnel 6.210.510.7Cost of license0.5Depreciation of network equipment an

315、d amortization of internal-usesoftware 46.342.719.5Total cost of revenue$85.3$108.3$72.2Research and Development.Research and development expenses consist primarily of salaries,equity-related compensation and related expenses for the design,development,testing and enhancement of ourservices and our

316、network.Research and development costs are expensed as incurred,except certain softwaredevelopment costs eligible for capitalization.During the year ended December 31,2002,we capitalized$6.0 million,net of impairments,of payroll and payroll-related costs related to the development of internal-usesof

317、tware used to deliver our services and operate our network.No payroll costs were capitalized in 2001 or2000.Research and development expenses decreased 51%,or$23.1 million,to$21.8 million for the year endedDecember 31,2002 as compared to$44.8 million for the year ended December 31,2001.Research andd

318、evelopment expenses were$38.2 million for the year ended December 31,2000.The decrease in expenses in2002 as compared to 2001 was primarily due to a decrease in salaries as a result of reduced headcount andreduced equity-related compensation due to employee terminations in the research and developme

319、ntorganization and an increase in capitalization of internal use software development costs.The increase inresearch and development in 2001 as compared to 2000 was primarily due to an increase in payroll andpayroll-related costs as a result of increases in headcount and an increase in equity-related

320、 compensation as aresult of the issuance of restricted stock at below market value.These eects are quantied as follows(inmillions):(Decrease)Increase inResearch and DevelopmentExpenses2002 to 20012001 to 2000Payroll and related costs,including equity compensation$(13.5)$6.7Capitalization of internal

321、-use software development costs(6.0)Other(3.6)(0.1)Total(decrease)increase$(23.1)$6.6Sales and Marketing.Sales and marketing expenses consist primarily of salaries,equity-relatedcompensation,commissions and related expenses for personnel engaged in marketing,sales and servicesupport functions,as wel

322、l as advertising and promotional expenses.Sales and marketing expenses decreased30%,or$28.1 million,to$64.8 million for the year ended December 31,2002 as compared to$92.9 million forthe year ended December 31,2001.Sales and marketing expenses were$110.9 million for the year endedDecember 31,2000.Th

323、e decrease in sales and marketing expenses in 2002 as compared to 2001 was primarilydue to a reduction in payroll,payroll-related costs and equity compensation attributable to a reduction inheadcount.The decrease in sales and marketing expenses for 2001 as compared to 2000 was primarily due to aredu

324、ction in advertising-related expenditures,partially oset by an increase in payroll and payroll-related costs22attributable to an increase in headcount and an increase in equity compensation as a result of the issuance ofrestricted stock at below market value.These eects are quantied as follows(in mi

325、llions):Decrease in Sales andMarketing Expenses2002 to 20012001 to 2000Payroll and related costs,including equity compensation$(27.5)$6.3Advertising and related costs 0.2(21.1)Other(0.8)(3.2)Total decrease$(28.1)$(18.0)General and Administrative.General and administrative expenses consist primarily

326、of depreciation andimpairment of network equipment and property and equipment used by us internally,salaries,equity-relatedcompensation and related expenses for executive,nance,information technology,or IT,human resources andother administrative personnel,fees for professional services,telecommunica

327、tions costs,the provision fordoubtful accounts,rent and other facility-related expenditures for leased properties.During the year endedDecember 31,2002,we capitalized$732,000 of payroll costs for IT personnel related to the development ofinternal-use software.No payroll costs were capitalized in 200

328、1 or 2000.General and administrative expenses decreased 20%,or$24.0 million,to$97.9 million for the year endedDecember 31,2002 as compared to$121.9 million for the year ended December 31,2001.General andadministrative expenses were$90.6 million for the year ended December 31,2000.The decrease in gen

329、eraland administrative expenses in 2002 as compared to 2001 was primarily due to a decrease in the provision fordoubtful accounts,reduced payroll-related costs as a result of reductions in headcount and reduced rentexpense as a result of facility restructurings.The decrease in the provision for doub

330、tful accounts in 2002compared to 2001 reects an improvement in the nancial health of our customer base,reecting our strategyto target permanent enterprise customers.The increase in general and administrative expenses in 2001 ascompared to 2000 was due to an increase in provision for doubtful account

331、s,an increase in payroll and payroll-related costs,an increase in facility costs,due to an expansion of our operations,and an increase indepreciation.Depreciation increased in 2001 as compared to 2000 as a result of increased purchases ofproperty and equipment by us in 2001.These eects are quantied

332、as follows(in millions):(Decrease)Increasein General andAdministrative Expenses2002 to 20012001 to 2000Bad debt expense$(8.7)$2.8Payroll and related costs,including equity compensation(5.1)3.8Rent and facilities(4.7)5.9Depreciation 1.015.1Other(6.5)3.8Total(decrease)increase$(24.0)$31.4Aggregate res

333、earch and development,sales and marketing and general and administrative expenses were$184.5 million,$259.6 million and$239.7 million for the years ended December 31,2002,2001 and 2000,respectively.As a result of our actions undertaken in 2002 to reduce our overall cost structure,includingemployee severances and lease terminations,we expect aggregate research and development,sales andmarketing a