transcript:
CNBC- SQUAWK BOX
INKTOMI CHAIRMAN AND CEO DAVID PETERSCHMIDT
MARCH 16, 1999
SUMMARY: Peterschmidt comments on the company's new online comparison shopping solutions and explains how the company's new shopping technology adds value to its stock.
Mark: Best known for search engine technology 1999 -- 1998 Internet IPO, Inktomi, continues to expand its business already used by 25 Web sites, include Yahoo!, America Online, the company says it's adding four to eight new search partners each quarter. Company's other main products include a traffic server, network caching technology and shopping engine technology. This morning the company announced adding 15 new portals, 300 on-line merchants to its on-line shopping platform. Before the news the shares closed up more than 5 points, 76 and change, not for the faint of heart, as you can see, pretty bumpy ride there. Joining us now to tell us more is David Peterschmidt, chairman and CEO at Inktomi. Good morning, sir. Good to see you again.
Good morning, Mark. How are you?
Mark: Pretty good.
Good.
Mark: Let's talk about what you're going to do to help me go shopping.
Sure.
Mark: What does this technology do?
Well, I think the biggest thing is that we're bringing together for the first time information to the consumer that they'll get now not just information from the merchant, but also from the World Wide Web itself we're going to use that big search engine technology to bring information to bear. And then we're starting to aggregate specialized content like "Consumers Digest" information, which has not been available to the consumer before. So, I'm going be able to go and look, say, for a DVD player and say tell me about them, I don't know much about them and actually get things like "Consumers Digest" information and other things to help me make my decision.
Mark: And direct me to on-line merchants who will sell to it me?
Exactly.
Mark: Let me ask you this.
Sure.
Mark: I gather, reading between the lines, a merchant doesn't get recommended unless the merchant signs up with you; is that correct?
Well, that's actually not the case, because the search engine will go out to the World Wide Web as well. The merchants are going have their information crawled and indexed that sign up for the site. So, their information is going be well-organized and presented, but the consumer will also be able to see information from the World Wide Web, which has got merchants on it that aren't necessarily signed up in this service.
Mark: Okay. Now, not to be crass, but I'm a shareholder, let's say, and my question is what's in this for me? How are we going make any money?
Sure. The merchants that sign up, those 300 merchants so far, they agree to pay a percent of every sale that occurs as a result of the shopping service. And then those 15 portals that we mentioned like Go from Disney and Geocities and CNNfn they're going to sell...
Mark: Never heard of them, but go ahead.
They're going to sell advertising on the site as well. There's two streams of revenue coming to Inktomi; one from the merchant as a percent of the revenue from the sale, and the other from the portal partner sharing the advertising revenue with us.
Mark: Richard.
Richard Lambert: Could you give us some idea what your revenues are running at now and when you think you might break even?
The last quarter we were just about $13 million in revenue. The analyst models for us have us breaking even in the second calendar quarter of next year.
Richard Lambert: And is the shopping part of that, is that an important component? Will that be an important component the end of this year, maybe?
Actually, what's interesting is in that model right now there are very conservative estimates for shopping, less than $2 million this year. Obviously, it holds a huge potential. We all know that shopping's going to be the next major application for generating revenue. We are being conservative about it. It's a very complex application. And we're going to be adding features almost monthly. So, we're going to roll this out gradually.
Mark: Right now your revenue's about 50/50, search engine, caching technology, traffic server.
That's right.
Mark: We've talked about this before, but you know, in reading the material over I realized I still don't understand the traffic server, network caching. I understand it sets up a parallel kind of Internet, moves the data closer to the person who is going to access it, but is this a hardware or a software platform?
It's software, Mark. And so, AOL is buying the software from us and running it on their site. Now, to give you an idea of how important this is, AOL's now taking 2.5 billion hits a day through the cache; that is, all of the AOL users that get Internet access content get it through the Inktomi cache. So this is a huge help to the user.
Mark: But it is a software program, okay.
That's right, it is software.
Mark: It's clearer to me. So you're not maintaining a network or anything like that.
No, that's right.
Mark: Thank you very much, sir.
Thanks, Mark.
Mark: We've been speaking with David Peterschmidt, Chairman and CEO at Inktomi. He joined us from our Midtown Manhattan studio. |
