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(UPDATE) High-Flying Internet Software Maker Inktomi Sees Profit By Late '99
Dow Jones Online News, Tuesday, July 07, 1998 at 16:27
NEW YORK -(Dow Jones)- Inktomi Corp., a high-flying Internet-software
newcomer that went public last month, expects to be profitable in the
latter half of next year, according to Chairman and Chief Executive
David Peterschmidt.
That bullish outlook prompted BT Alex. Brown Inc. to start coverage
Tuesday on the stock with a "buy" rating and investors to throw more
money into the issue. At the close, Inktomi's Nasdaq-listed stock (INKT)
was up $2.875, or 3.9%, at $76.50, more than four times the value of its
$18 initial offer price. The stock soared $25.625 in Monday's blistering
Internet stock rally.
Inktomi provides search-engine technology used by customers such as
Microsoft Corp.'s on-line unit, Yahoo! Inc. and HotBot, a unit of Wired
Ventures Inc. In addition, Inktomi makes software that eases Internet
traffic. The company's name is derived from a mythical Lakota Indian
spider that defeated its larger enemies through cunning.
Like many Internet-related companies with big stock-market
valuations, Inktomi has yet to report a profit. For the six months ended
March 31, it had revenue of $5.9 million and a net loss of $7.9 million.
Peterschmidt didn't provide a specific earnings forecast, saying only
that the company's revenue stems from user fees tied to its technology
that powers search engines and its recently unveiled network caching
technology.
"America Online is putting the network cache throughout their entire
network. They will probably spread that across hundreds of massive
computers, and we will get paid for each of those network computers that
the software license resides on," Peterschmidt told cable television
network CNBC.
According to the executive, the network caching technology will
distribute data and accelerate the retrieval of information on the
Internet.
As far as competition is concerned, Peterschmidt isn't too concerned.
"So far, no one has been able to enter the market with this technology.
We're really the first company to commercialize this set of
technologies."
Inktomi went public last month with a bang. The underwriters jacked
up the offering price from $14 to $18 a share, and then sat back and
watched as investors bid up the stock to $38.625 before it closed at $36
in its debut.
While other search engines race to become "portals" through which
users navigate the Web, Inktomi is concentrating on supplying its
search-engine technology to many Web services. Yahoo adopted Inktomi's
search engine last month, displacing Digital Equipment Corp.'s Alta
Vista engine. CNET Inc.'s Snap service also uses Inktomi's search
engine.
Inktomi's search tools distribute requests to multiple computers,
which then work in parallel. The engines are considered the most
powerful available, and HotBot has been ranked among the Web's top
search services.
Inktomi also makes "flow-control" software, which helps users
attached to corporate networks surf the Web more efficiently by storing
copies of pages from remote sites on the company's own computers, so
they needn't be downloaded repeatedly. Some analysts think this service
is the key to Inktomi's future.
Inktomi is the latest in a series of hot IPOs by Internet-related
companies, including ISS Group Inc., Verisign Inc. and Exodus
Communications Inc. The Internet sector is the only area of the
new-issues market that has consistently performed well. Consequently,
fund managers clamor for the offerings, driving up demand and price.
Inktomi got its start in 1995, when Prof. Eric Brewer was conducting
government-funded research at University of California, Berkeley, on
ways to link many computer workstations to function like a
supercomputer. His first demonstration project involved creating an
Internet search engine. Realizing that it had commercial potential, he
and Paul Gauthier, one of his former students, formed Inktomi.
The two men agreed to pay the university a licensing fee, in stock,
for work done at Berkeley. Details of that licensing arrangement aren't
public, but the university holds less than 5% of the shares. The largest
holder in Inktomi, with about 15% of the stock, is Oak Investment
Partners, a venture-capital group with offices in Westport, Conn., and
Palo Alto, Calif.
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
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