BusinessWeek article:
Check out this article on the most recent edition
of BusinessWeek. Very bullish.
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Microsoft Dumped Inktomi. So What?
Internet software provider Inktomi (INKT) is not a stock for the
faint of heart: In the past five months, it has often jumped or
dropped 10 to 15 points in a day--on little provocation. After
hitting a high of 178 on Jan. 11, it slid to 148 on Jan. 25. The
next day, Microsoft announced that it was phasing out Inktomi's
Internet search service as the primary platform for Microsoft's
Web network (page 53). Inktomi's stock fell almost 20 points,
to 129. Is it downhill from here?
No way, say some pros. Although a lot of momentum players
bailed out, not a few Inktomi fans bought shares as the price
sank. ''It wasn't a major setback--just a speed bump,'' insists
John Leo, who heads Northern Technology Fund, a unit of
Northern Trust. ''We view the big drop as a terrific buying
opportunity, so we're adding to our position.''
Analysts Rakesh Sood and Michael Parekh at Goldman Sachs
stood pat, reiterating their positive ''market outperform'' rating
on Inktomi. Leo notes that Microsoft's move to replace
Inktomi's search technology with that of AltaVista, a
Web-search and navigation site of Compaq Computer, reflects
the business relationship that Microsoft is continuing to build
with Compaq--Microsoft's largest customer. ''It's not indicative
of any concern about Inktomi's technology,'' he adds.
Microsoft makes up less than 5% of Inktomi's revenues, says
Leo, and he's sure Inktomi can recoup the loss through new
customers. He notes that Inktomi provides its search technology
to 18 big companies, including Yahoo!, America Online, and
Lycos.
Apart from its search technology, Inktomi also has a ''traffic
server'' product that stores data close to where it is needed by
Internet users. Inktomi has a new product that will provide
''comparison shopping,'' to compare prices and information on
various products online.
Last year, Inktomi's sales quadrupled, to $20.4 million, and Leo
expects them to continue growing--to $60 million in 1999 and
$110 million to $125 million in 2000. Still in the red, Inktomi
should break even by 2000, he figures. |
