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Yahoo! Snaps Up Inktomi for $235M

Taking a step back in the direction of its search roots, Yahoo! Monday forged an agreement to acquire search technology provider Foster City, Calif.-based Inktomi for about $235 million.

Inktomi brings Yahoo! its pay-for-inclusion technology, a rapidly growing space in the search market. Inktomi's Index Connect and Search Submit products allow retailers like Amazon.com and WalMart.com to have their wares appear under the appropriate keyword in Inktomi-powered searches, like those provided by Lycos/HotBot, MSN and Overture.

Index Connect provides detailed information about products and services available on the Internet as well as direct access to the exact pages for the items. For instance, through a direct XML feed, Inktomi Connect allows Amazon.com to ensure its ecommerce wares appear in Web search results with detailed descriptions. If a retailer runs out of inventory on a particular item, or decides to switch out an underperforming product in favor of another, the listings can be updated on the fly.

"The addition of Inktomi's search platform adds both control and flexibility to this important business, thus enhancing our ability to create new and more innovative search offerings for consumers and businesses," said Terry Semel, Yahoo! chairman and CEO.

Inktomi hit the scene in 1996, specializing in algorithmic Web search technology. But the past year has seen it losing ground to Sunnyvale, Calif.-based Google, with big-name partners like AOL, iWon, and even Yahoo!$235 million for Inktomi's expected cash balance net of debt, as of Dec. switching their allegiance to Google.

In past months, the company has struggled to remain afloat, narrowly avoiding delisting from the NASDAQ exchange in December. On Dec. 18, the company finalized the sale of its corporate search business to Verity for $25 million. The company picked up the business in June 2000 for about $344 million.

Yahoo! said Monday it will acquire the remaining piece of Inktomi for $1.65 per share in cash, or a total of about $241.5 million, adjusted to about $235 million for Inktomi's expected cash balance net of debt, as of Dec. 31.

The deal is subject to the approval of Inktomi's shareholders, and Yahoo! said it expects to complete the transaction in first quarter 2003. The company said it predicts the deal will be accretive to earnings per share within 12 months of closing.