Common use of SUBSEQUENT EVENT Clause in Contracts

SUBSEQUENT EVENT. In July 2000, the Company acquired all of the outstanding common and preferred stock of CallTheShots Inc. ("CTS"), in exchange for a combination of Akamai common stock and cash. The purchase price is estimated to be approximately $6 million based on the fair value of the consideration paid plus direct acquisition costs. The acquisition will be accounted for as a purchase. CTS develops services that enable Web site visitors to personalize their interaction with such site. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS‌ This Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. For this purpose, statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Actual results may differ materially from those indicated in such forward-looking statements as a result of certain factors including, but not limited to, those set forth under the heading "Factors Affecting Future Operating Results." OVERVIEW We provide global delivery services for Internet content, streaming media and applications, and global Internet traffic management services. Our services improve the speed, quality, availability, reliability and scalability of Web sites. Our services deliver our customers' Internet content, streaming media and applications through a distributed worldwide server network, which locates the content and applications geographically closer to users. As of June 30, 2000, we had approximately 2,100 signed customers, including 895 customers under recurring contract. Since our inception, we have incurred significant losses, and as of June 30, 2000, we had an accumulated deficit of $337.2 million. We have not achieved profitability on a quarterly or an annual basis, and anticipate that we will continue to incur net losses. We expect to incur significant engineering and development and sales, general and administrative expenses and, as a result, we will need to generate significant revenue to achieve and maintain profitability. In the first quarter of 2000, we entered into agreements to acquire all the outstanding common and preferred stock of Network24 Communications Inc. ("Network24") and INTERVU Inc. ("INTERVU"). We acquired both of these companies to accelerate market leadership in streaming media. The Network24 acquisition was consummated on February 10, 2000 in exchange for 620,872 shares of our common stock and $12.5 million in cash. We also issued options and warrants exercisable for 195,862 shares of our common stock in exchange for all outstanding options and warrants exercisable for Network24 common stock. The INTERVU acquisition was consummated on April 20, 2000 in exchange for 10.0 million shares of our common stock. We also issued options and warrants exercisable for 2.2 million shares of our common stock in exchange for all outstanding options and warrants exercisable for INTERVU common stock. We have included the results of operations of Network24 subsequent to February 10, 2000 and INTERVU subsequent to April 20, 2000 in our statements of operations for the three and six months ended June 30, 2000. Both acquisitions are accounted for using the purchase method of accounting. In connection with the Network24 and INTERVU acquisitions, we expect amortization expense for the next four years as follows (in millions): YEAR ENDING DECEMBER 31, ------------ 2000...................................................... $674 2001...................................................... 953 2002...................................................... 953 2003...................................................... 274 We derive our revenue from the sale of our services under contracts with terms typically ranging from 12 to 24 months. We recognize revenue primarily based on fees for the amount of Internet content delivered through our services. These contracts also provide for minimum monthly fees. Customers are typically billed monthly in advance for minimums and monthly in arrears for usage above the minimums. We also derive revenue for implementation, installation, usage and other fees that are recognized over the period of the related contracts or customer relationships. To date, substantially all of our revenue has been derived from customers based in the United States. We expect that revenue from customers based outside the United States will increase in future periods. To date, substantially all of our revenue has been derived from direct sales; however, we expect that revenue through indirect distribution channels will increase in future periods. Sales to Apple Computer represented 22% and 18% of our revenue for the year ended December 31, 1999 and the six months ended June 30, 2000, respectively. Sales to Yahoo! represented 13% of our revenue for the year ended December 31, 1999. Sales to Apple Computer represented 17% of our revenue for the three months ended June 30, 2000. Cost of services consists of fees paid to network providers for bandwidth, depreciation of network equipment used in providing our services and monthly fees paid to third-party network data centers for housing our servers. We enter into contracts for bandwidth with third-party network providers with terms typically ranging from six months to three years. These contracts may commit us to minimum monthly fees plus additional fees for bandwidth usage above our contracted level or may commit us to share with the third-party network providers a portion of the revenue we recognize from customers that use these third-party networks. Under our accelerated networks program, we provide use of our servers to smaller Internet service providers which, in turn, provide us with rack space for our servers and access to their bandwidth. We do not recognize as revenue any value to the Internet service providers associated with the use of our servers and do not expense the value of the rack space and bandwidth we receive. We believe that, to date, the value provided under this program has been insignificant. We expect our cost of service to increase as we continue to deploy our network. Engineering and development expenses consist primarily of salaries and related personnel costs and costs related to the design, development, testing, deployment and enhancement of our services and our network. We have to date expensed our engineering and development costs as incurred. We believe that research and development is critical to our strategic product development objectives and intend to continue to enhance our technology to meet the changing requirements of the market demand. As a result, we expect our engineering and development expenses to increase in the future. Sales, general and administrative expenses consist primarily of salaries and related costs of sales and marketing, operations and finance personnel and recruiting expenses, professional fees and legal and accounting services. We expect that sales, general and administrative expenses will increase in the future as we hire additional personnel, expand our operations, initiate additional marketing programs, establish sales offices in new locations and incur additional costs related to the growth of our business and our operations as a public company. Amortization of intangible assets consists primarily of the amortization of intangible assets acquired in business combinations, including goodwill. Acquired in-process research and development consists of a nonrecurring charge for the value of developmental projects that had not reached technological feasibility and had no alternative future use. RESULTS OF OPERATIONS

SUBSEQUENT EVENT. In On July 200024, 2001, the Company acquired all of the outstanding common and preferred stock of CallTheShots Inc. ("CTS"), in exchange for a combination of Akamai common stock and cashannounced plans to reduce expenses which included reducing full-time equivalent employees by approximately 30% through mandatory staff reductions. The purchase price is estimated to be approximately $6 million based on Company will record an employee severance charge during the fair value of the consideration paid plus direct acquisition costs. The acquisition will be accounted for as a purchase. CTS develops services that enable Web site visitors to personalize their interaction with such sitequarter ending September 30, 2001. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS‌ This OPERATIONS Information herein contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," or "continue" or the negative thereof or other variations thereon or comparable terminology or which constitute projected financial information. The forward-looking statements relate to the near-term semiconductor capital equipment industry outlook, demand for our products, our quarterly revenue and earnings prospects for the near-term future and other matters contained herein. Such statements are based on current expectations and beliefs and involve a number of uncertainties and risks that could cause the actual results to differ materially from those projected. Such uncertainties and risks include, but are not limited to, the cyclicality of the semiconductor industry, impediments to customer acceptance, fluctuations in quarterly operating results, competitive pricing pressures, the introduction of competitor products having technological and/or pricing advantages, product volume and mix and other risks detailed from time to time in our SEC reports. For further information, refer to the business description and risk factors sections included in our Form 10-K for the year ended March 31, 2001, and the risk factors section included in this Form 10-Q contains forward(Part II, Item 5) as filed with the SEC. RESULTS OF OPERATIONS Tegal designs, manufactures, markets and services plasma etch systems used in the fabrication of integrated circuits, read-looking statements within write heads for the meaning of Section 21E of the Securities Exchange Act of 1934disk drive industry, as amendedprinter heads, telecommunications equipment and small flat panel displays. For this purpose, statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Actual results may differ materially from those indicated in such forward-looking statements The following table sets forth certain financial items as a result percentage of certain factors including, but not limited to, those set forth under the heading "Factors Affecting Future Operating Results." OVERVIEW We provide global delivery services for Internet content, streaming media and applications, and global Internet traffic management services. Our services improve the speed, quality, availability, reliability and scalability of Web sites. Our services deliver our customers' Internet content, streaming media and applications through a distributed worldwide server network, which locates the content and applications geographically closer to users. As of June 30, 2000, we had approximately 2,100 signed customers, including 895 customers under recurring contract. Since our inception, we have incurred significant losses, and as of June 30, 2000, we had an accumulated deficit of $337.2 million. We have not achieved profitability on a quarterly or an annual basis, and anticipate that we will continue to incur net losses. We expect to incur significant engineering and development and sales, general and administrative expenses and, as a result, we will need to generate significant revenue to achieve and maintain profitability. In the first quarter of 2000, we entered into agreements to acquire all the outstanding common and preferred stock of Network24 Communications Inc. ("Network24") and INTERVU Inc. ("INTERVU"). We acquired both of these companies to accelerate market leadership in streaming media. The Network24 acquisition was consummated on February 10, 2000 in exchange for 620,872 shares of our common stock and $12.5 million in cash. We also issued options and warrants exercisable for 195,862 shares of our common stock in exchange for all outstanding options and warrants exercisable for Network24 common stock. The INTERVU acquisition was consummated on April 20, 2000 in exchange for 10.0 million shares of our common stock. We also issued options and warrants exercisable for 2.2 million shares of our common stock in exchange for all outstanding options and warrants exercisable for INTERVU common stock. We have included the results of operations of Network24 subsequent to February 10, 2000 and INTERVU subsequent to April 20, 2000 in our statements of operations for the three and six months three-month periods ended June 30, 2001 and 2000. Both acquisitions are accounted for using the purchase method of accounting. In connection with the Network24 and INTERVU acquisitions, we expect amortization expense for the next four years as follows (in millions): YEAR ENDING DECEMBER 31, ------------ 2000...................................................... $674 2001...................................................... 953 2002...................................................... 953 2003...................................................... 274 We derive our revenue from the sale of our services under contracts with terms typically ranging from 12 to 24 months. We recognize revenue primarily based on fees for the amount of Internet content delivered through our services. These contracts also provide for minimum monthly fees. Customers are typically billed monthly in advance for minimums and monthly in arrears for usage above the minimums. We also derive revenue for implementation, installation, usage and other fees that are recognized over the period of the related contracts or customer relationships. To date, substantially all of our revenue has been derived from customers based in the United States. We expect that revenue from customers based outside the United States will increase in future periods. To date, substantially all of our revenue has been derived from direct sales; however, we expect that revenue through indirect distribution channels will increase in future periods. Sales to Apple Computer represented 22% and 18% of our revenue for the year ended December 31, 1999 and the six months ended June 30, 2000, respectively. Sales to Yahoo! represented 13% of our revenue for the year ended December 31, 1999. Sales to Apple Computer represented 17% of our revenue for the three months ended June 30, 2000. Cost of services consists of fees paid to network providers for bandwidth, depreciation of network equipment used in providing our services and monthly fees paid to third-party network data centers for housing our servers. We enter into contracts for bandwidth with third-party network providers with terms typically ranging from six months to three years. These contracts may commit us to minimum monthly fees plus additional fees for bandwidth usage above our contracted level or may commit us to share with the third-party network providers a portion of the revenue we recognize from customers that use these third-party networks. Under our accelerated networks program, we provide use of our servers to smaller Internet service providers which, in turn, provide us with rack space for our servers and access to their bandwidth. We do not recognize as revenue any value to the Internet service providers associated with the use of our servers and do not expense the value of the rack space and bandwidth we receive. We believe that, to date, the value provided under this program has been insignificant. We expect our cost of service to increase as we continue to deploy our network. Engineering and development expenses consist primarily of salaries and related personnel costs and costs related to the design, development, testing, deployment and enhancement of our services and our network. We have to date expensed our engineering and development costs as incurred. We believe that research and development is critical to our strategic product development objectives and intend to continue to enhance our technology to meet the changing requirements of the market demand. As a result, we expect our engineering and development expenses to increase in the future. Sales, general and administrative expenses consist primarily of salaries and related costs of sales and marketing, operations and finance personnel and recruiting expenses, professional fees and legal and accounting services. We expect that sales, general and administrative expenses will increase in the future as we hire additional personnel, expand our operations, initiate additional marketing programs, establish sales offices in new locations and incur additional costs related to the growth of our business and our operations as a public company. Amortization of intangible assets consists primarily of the amortization of intangible assets acquired in business combinations, including goodwill. Acquired in-process research and development consists of a nonrecurring charge for the value of developmental projects that had not reached technological feasibility and had no alternative future use. RESULTS OF OPERATIONS: