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Ask Jeeves Searching For Answers

Online search service Ask Jeeves isn't the biggest loser of the year among Internet stocks; about 30 other 'Net tickers have fallen even more than ASKJ's 81 percent plunge through Tuesday's trading.

But none of the other major decliners - with the possible exceptions of Linux software vendor Red Hat and B2B incubator Internet Capital Group - have benefited from the kind of hype campaign that helped ASKJ to a 364 percent first-day gain when the company went public last July 1. Only six other Internet IPOs out of 258 last year topped that debut.

It's hardly news that venture capitalists and underwriters shill for their stocks to pump up demand among investors. That's one of the main causes behind this spring's correction. What took Ask Jeeves to new levels of puffery was the complicity of the business press, which wrote one gushy article after another praising the company's "natural language" search engine and marveling over its marketing campaign, spearheaded by a cartoon butler borrowed from the works of author P.G. Wodehouse.

It's too bad the press didn't spend less time chuckling over the butler's appearance as a float in last year's Macy's Day parade and more time exploring specious assumptions about Ask Jeeves' search technology, as well as the company's short operating history and mounting losses. (I covered these topics in detail right before and after last year's IPO.) Many investors might have been spared some hefty losses of their own.

Who knows, maybe company president and COO Ted Briscoe also might have stayed in his new job for more than two months. Ask Jeeves announced Wednesday that Briscoe will be leaving to become CEO of a private start-up.

His departure comes as ASKJ shares are trading near all-time lows and in the wake of last month's quarterly report, which showed strong revenue growth but widening losses, even though CEO Robert Wrubel predicted one year ago this month that Ask Jeeves would become profitable within 24 months. Given the Q1 loss of $47 million - up from $4.9 million in the year-ago quarter and $28.7 million in Q4 '99 - that's just not going to happen.

Having said that, the company has done a good job of growing revenues, which reached $17.8 million in Q1, compared to $1.1 million in last year's first quarter and $11.7 million in the previous quarter. Still, in the current market climate, revenue growth isn't enough, and you can expect investors to zero in on that bottom line.

So the question is, can the company's stock, which hit an all-time low of 17 7/8 last week and was trading Wednesday at 20 3/8, bounce back in the near future? You probably can answer that question yourself. Whatever you do, don't Ask Jeeves.



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