By Mike Tarsala, CBS.MarketWatch.com
Last Update: 5:41 PM ET Feb 8, 2001
PALO ALTO, Calif. (CBS.MW) -- Shares of Inktomi gained 10 percent Thursday on speculation
that the software maker is talking to Sun Microsystems about building Internet-caching
computers.
Analysts say that Sun, using its Cobalt brand name, could become the first major computer
maker to offer Inktomi's software as the heart of a so-called caching appliance. Silicon Valley
stalwarts Intel (INTC: news, msgs) and 3Com (COMS: news, msgs) already use Inktomi's
software to offer such computers that connect to a network to temporarily store
frequently-accessed files and Web pages.
"It's a logical strategic partnership for Inktomi (INKT: news, msgs) , given their strong
relationship with Sun (SUNW: news, msgs) , and their push into the enterprise," said Alan
Adler, analyst with Friedman, Billings, Ramsey & Co.
Analysts said speculation about a deal with Inktomi surfaced at Sun's analyst meeting this
week in San Francisco. While the company didn't expressly tell analysts it's inked a contract
with Inktomi, Sun said it plans to expand its relationship with the software company, according
to Nitsan Hargil, analyst with Kaufman Bros. in New York.
"They are, in my opinion, no more than a couple of quarters from heading full-force in this
direction," Hargil said.
Scott McNealy, Sun's chief executive, also told analysts at the conference that Sun is looking
for ways to expand its lineup of single-purpose computers, known as appliances.
Any possible agreement with Sun could help Inktomi sell more of its software to large
businesses -- key to the company's long-term strategy. But it also could help Sun, which is
looking for new ways to grow after it posted disappointing revenue in the fourth quarter.
The companies have not signed a formal agreement to build Internet caching appliances,
according to Steve Diamond, an Inktomi spokesman. He did say, however, that Sun is in talks
with a number of hardware companies.
"All I can tell you is to stay tuned," Diamond said. "Once we have an announcement to make,
we will be very eager to make those announcements."
There's no near-term deal with Inktomi close enough to talk about, said Ingrid Kambe, Sun
spokeswoman. She noted that Sun and Inktomi already are working together to offer
broadband services. Other than that, "There's not anything that we're talking about as far as a
hardware bundle with Inktomi."
Last month, Sun first announced products that use its Cobalt name, which it acquired by
paying $1.3 billion for Cobalt Networks in December. Breaking with its tradition of using its own
brand of chips and software, Sun unveiled Cobalt computers in January that use chips from
Advanced Micro Devices running Linux.
Sun came out with two Cobalt-brand server appliances: One is designed for companies that
host Web sites. The other is a machine for caching.
The appliance market, could be more than a billion-dollar market opportunity for Sun, analysts
said. But it also is a threat for the company, since inexpensive appliances could cut into
higher-profit sales of Sun's general-purpose servers. It's one reason some say Sun is reluctant
to offer server appliances under its own name.
"It's like Cadillac bringing something out in the subcompact line," said Rob Enderle, market
analyst with Giga Information Group. "They have established themselves as a premium brand,
and appliances are at the low end of the market."
It's why Sun may choose to offer Inktomi-based appliances under its Cobalt brand.
"The difference is in the message," Enderle said. "They won't be diluting their premium
products." Shares of Inktomi gained $1.31 to $14.19 in Nasdaq trading Thursday. Sun Microsystems
shares fell 69 cents, or nearly 3 percent, to $25.88. |
