RealTime IT News

Inktomi Becoming Synonymous With Infrastructure

Good news tends to be wasted in a down market, but two items this week underscore the fundamental strength of Internet caching and search engine software player Inktomi Corp.

First, a report released Thursday by the Internet Research Group projects that demand for Internet caching will grow from $287 million this year to $2.2 billion in 2003.

This bodes well for Inktomi, an early leader in the caching market. The San Mateo, Calif.-based company's Traffic Server software, used by ISPs to handle high-bandwidth demands by storing frequently requested information at various locations in the network, accounted for 60% of the $19.6 million in sales for the quarter ended June 30, up from 56% in Q2.

Second, Inktomi on Wednesday announced it has signed up 10 more customers for its popular search services, including domain name registrar Network Solutions and Findwhat.com, a "pay for position" Web search service slated to debut this summer.

What's most impressive about Inktomi is that it has emerged as a leader in two separate Internet markets - search engine software and caching software. And the reason is scalability. Inktomi's technology has been proven capable of handling the immense volume of data traffic with which ISPs, portals and large corporate sites must contend.

Founded in 1996, Inktomi first made a name for itself with its HotBot search technology. The company's list of search engine customers reads like a who's who of the Internet, and includes America Online, Yahoo!, Microsoft, Snap!, GeoCities, CompuServe and StarMedia Network. Inktomi's search technology handled more than 2 billion queries in the last quarter.

The company added two new search products this year. Its directory engine categorizes search results by topic and can be customized by customers. Network Solutions, fighting to keep its share of the domain name registration market, is using this software to run its recently unveiled Dot Com Directory.

Inktomi's Shopping Engine enables portals and other customers to offer comparison shopping, product information and transaction services. It also gives Inktomi a new revenue stream - electronic commerce. The company gets between 5% and 15% of each purchase from any merchant that makes a sale to a customer who was directed to the merchant's site from a portal using Shopping Engine. (Inktomi then splits its take with the portal.)

The number of competitors in the caching space has risen from 13 to 27 in the past year, according to the Internet Research Group report, but Inktomi has risen to the challenge. Sales of Traffic Server and related products rose from rose from $3.06 million in Q3 '98 to to $11.8 million in the most recent quarter, a 286% increase in one year.

And while still losing money, Inktomi continues to cut losses and has beaten analysts' expectations for four consecutive quarters.

With a market cap of $5.7 billion, Inktomi is priced at 100 times total revenue. But while many Internet will never grow enough to justify their present exorbitant valuations, Inktomi is a good bet to make the short list of big 'Net winners, for its products are becoming a critical part of the Internet's infrastructure.

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