craig and others, here's the transcript of squawk today
CNBC- SQUAWK BOX
INTERVIEW WITH INKTOMI (INKT) CHAIRMAN AND CEO DAVID PETERSCHMIDT
APRIL 16, 1999
SUMMARY: Peterschmidt believes Inktomi's shopping search engine is helping the Internet's marketing model. Peterschmidt comments on the company's network cache system.
Mark: Keep an eye on shares of Internet infra-structure provider, Inktomi, after the bell yesterday, the company posted a loss of 9 cents a share for the second quarter. That's a penny better than estimates, and 4 cents better than a year ago. Revenues saw impressive gains, up 323% to 14 million dollars. The company increased the number of search queries in the second quarter, and forged a key European alliance. The company added BellSouth, Global DataTel and Go-Profit to customer list. While the stock took a hit yesterday, closed down 17. They're indicated higher today. Here to crunch some numbers, tell us what's going on for his company, 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: The numbers are satisfactory, so far as you're concerned?
Yeah.
Mark: You're on track? On plan?
Yeah, very much so. The whole business is strong across all fronts of our markets. So, we felt it was not just a great top line, but quarter to quarter the revenues continue to grow at over 30%, but more importantly all of the business, search grew above our expectations, network product cache grew above our expectations. And although our shopping engine comes on-line this quarter, the number of portals that have signed up for that service is ahead of plan also. So, the company's performing very well.
Mark: Let me ask you about that, about where your revenues come from, because you just pretty much ran down the list of things that your company does. And let me read you some research here. "Our expectation is that over time" oh, you're over here now. "Our expectation is that over time, the largest part of Inktomi's revenue base will come from licenses of traffic server. The product has been licensed through only a select number of customers, market for large-scale and enterprise network caching is still in its infancy and remains to be seen whether Inktomi's customers will widely adopt and employ caching technology throughout their networks." That's some recent Wall Street research.
Right.
Mark: Is that an accurate description? I thought you were kind of further along than that implies.
I think that network caching is newer. A year ago, when we introduced this product, there were no network caching systems anywhere in the world. Today we have probably eight to 10 full-network deployments of network caching. So, the article is pretty much correct in a sense that we don't have broad adoption of thousands of companies, but that's coming quickly. I think what is significant about this, is that both AOL and at home have come back and made their second purchases now of probably three to four months sooner than we had anticipated. AOL's now taking 2.6 billion requests a day through the network cache system for Web information.
Mark: We should just say this for the technically, non-technically inclined. Caching is storing the data closer to the user, for lack of a better.
Yeah.
Mark: I want to ask you this though. Your shopping engine, it's going to go out and do comparison shopping for me.
Yes, that's right.
Mark: Aren't you kind of destroying the marketing model on which the Internet has operated so far? What's in it for me? Let's say I'm running Dell. What's in it for me to run a big ad space or preferred treatment on Yahoo!. If Yahoo! Users are going to use your engine and wind up with a beautiful comparison shopping list? Doesn't that threaten the marketing model?
No. I don't think that threatens the marketing model. What we're actually doing is helping the marketing model, because so far all we've had is fundamental price comparison for shopping. What we're doing is actually bringing a system onboard that's going to give the user a lot of high-quality information on how to make decisions about goods they may not know a lot about. It actually makes it more economical for the merchant. So, for example, if I'm looking for a DVD player, I personally, all I know is they play movies, but I don't know what to look for in features and so forth. This shopping engine is actually going to help me understand the types of features I should look for. And it will help me get quality assessments of products before I start looking for the product and a price for it. So, it actually helps the merchant get the story and get quality buyers into their business.
Joe: Does it really? Because isn't it more to the consumer' benefit to have this? And won't this source of revenue flow change a little bit, because as Mark pointed out, would a computer manufacturing take out high rent space on Yahoo! To be compared unfavorably to someone else?
They really don't have a choice. Now, what the merchant's hoping for is that they're actually going to get consumers that normally would not come just to their Web site through a banner ad, that they're actually going to have people who, as they're getting broad cross-comparisons, will actually attract users that their normal advertising would not find for them. Remember that for the merchant in our model they don't pay anything unless a sale occurs to participate in this service.
Mark: Oh, yeah. It's clear you're going to do okay. We're just wondering about everybody else. Now, Mr. Peterschmidt, we're out of time, but we do thank you very much, sir.
You bet. Thank you, Mark.
Mark: David Peterschmidt Chairman and CEO at Inktomi.
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