Inktomi Corp

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INKTOMI CORP.

Inktomi Corp. was founded in 1996 by Eric A. Brewer and Paul Gauthier. Just six years later, with annual sales reaching $223.5 million, Inktomi had secured a leading position among search engine technology providers. By 2001, the firm's partner and customer base included the likes of America Online Inc. (AOL), Ameritech, Cisco Systems, Compaq Computer Corp., Intel Corp., Microsoft Corp., Sun Microsystems Inc., Nextel Communications, and Yahoo! Inc. Along with its search engine software, Inktomi developed its Traffic Server—software using caching, or storing, technology to speed up the delivery of content on the Web—and also offered various other content networking and wireless solutions that catered to both enterprises and service providers.

EARLY HISTORY

Brewer, a University of California at Berkeley professor, and Gauthier, a graduate student there, established Inktomi in 1996 while working on Brewer's Ph.D. dissertation. The pair set out to prove that a cluster of desktop computers could be wired together to be as powerful and have the same data-processing capabilities as more expensive supercomputers. To test the theory, they developed search engine software that could sort through Web pages to retrieve information. Eyeing the research project as a lucrative business opportunity, Brewer and Gauthier exited the academic world.

In 1996, the pair sought out David Peterschmidt, CEO of data specialist firm Sybase, to manage the search engine startup. With six employees, Inktomi—named after a Native American word meaning cunning spider—secured its first customer in May, when it began providing the search engine technology for the HotBot Web site. Under the leadership of Peter-schmidt, the company also began to develop caching technology that would allow Internet Services Providers (ISPs) to speed up content delivery over the Web by storing frequently requested Web pages locally on their computers. In 1997, Inktomi began testing the software under the name Traffic Server.

By the time the firm went public in June 1998, it had partnered with some of the industry's largest players and expanded into Europe and Asia. Inktomi's Traffic Server began running on Intel Corp.'s systems in a deal that included Intel's purchase of a small stake in the firm. AOL also tapped into Traffic Server to manage data flow throughout its network. Yahoo! teamed up with Inktomi and began using the firm's search technology on its site in July of that year, replacing AltaVista as the default search engine.

EXPANSION

The firm focused on expansion after the IPO. In September of 1998, Inktomi purchased C2B Technologies, a producer of online shopping comparison software. The acquisition added a third product line to Inktomi's arsenal—Inktomi Shopping Engine—and marked the company's entrance in the growing e-commerce industry. Inktomi also secured lucrative customer contracts with high-speed ISP @Home Networks and Microsoft-owned MSN Network.

Furthering the growth of its new Shopping Engine, Inktomi purchased online merchandising software developer Impulse! Buy Network Inc. in April 1999. By this time, the Shopping Engine had been improved to allow consumers to research products, compare prices, and purchase items. It also powered sites like Go Network, CNET, Snap, and Time Inc.'s New Media. At the same time, Inktomi also created its Directory Engine, which enabled portals like Yahoo! to create and maintain Web directories.

By 1999, with revenues of $71.2 million, Inktomi emerged as the leading search technology provider. A September 1999 BusinessWeek Online article attributed the firm's success to Peterschmidt's foresight. "Search companies like Excite and Lycos decided to mimic Yahoo and become Web directories and, ultimately, gateways to the Web. But rather than turn Inktomi into yet another Yahoo copycat, Peter-schmidt positioned it as a behind-the-scenes provider of essential technology that all of the major Web sites needed. By not competing with its potential customers, the company has avoided conflicts, enabling it to sell its products to the fiercest of rivals, like Yahoo and AOL."

While its search engine segment thrived—by August of 1999, the Inktomi Search Engine powered over 50 portals and destination sites—the company's Traffic Server business accounted for the largest portion of revenue, securing $40.3 million in 1999. As a result, the firm continued to focus heavily on that division. In September, Inktomi announced plans to purchase WebSpective Software Inc., a content distribution management firm. Upon completion of the deal, the company began offering the Inktomi Content Delivery Suite, the first integrated content delivery, distribution, and management solution package available in the industry.

Inktomi continued expansion efforts into the new millennium. It purchased FastForward Networks, an online streaming media provider, as well as Ultraseek Corp., a subsidiary of Internet portal GO.com. The company also teamed up with Adero Inc., a network services provider, and AOL to form Content Bridge, an alliance of technology-based firms working together to improve content delivery over the Internet. In 2000, revenues tripled for the third year in a row; network products accounted for nearly 70 percent of the total. The company operated in the black for the first time. By then, the firm's product line consisted of Content Networking Solutions, Inktomi Search Solutions, and Wireless Solutions, a new segment that included Inktomi Wireless Data Accelerator software that was designed to boost network capacity. As part of the firm's effort to focus on its Content Networking offerings, it sold the Inktomi Commerce engine to ecentives Inc. in March 2001.

While many firms in the information technology sector began feeling the effects of the economic slowdown and increased competition in the late 1990s, Inktomi remained virtually unscathed until 2001. In April of that year, the firm announced job cuts and stated in an E-Commerce Times article that "economic conditions in the United States and Europe have declined more quickly than we had initially anticipated, forcing us to take strong cost-cutting measures for the continued health of our business." Inktomi stock was trading at $5.45 in March, down from a 2000 high of nearly $240 per share.

Believing the Content Networking Solutions segment would continue to be a major growth area, Inktomi focused on research and development in that area. By offering both service providers and enterprises control over network content, Inktomi aimed to gain a strong foothold in the increasingly competitive e-business market. Despite weakening economic conditions, Inktomi was determined to remain a leader in providing Internet infrastructure solutions.