Software firm dives into caching market

The young software firm has gained modest success in selling technology that helps businesses create e-commerce Web sites. Now the company is jumping into the growing market for Web caching and is hoping to replicate the success of software maker Inktomi and Web content services supplier Akamai, two pioneers in the technology.

Persistence will soon ship caching software called Dynamai, aimed at helping e-commerce Web sites speed the transfer of information over the Net.

Typically, when a Web surfer requests a Web page, the query is sent to the Web site system, which then retrieves the information--such as graphics and sounds--in a company database before delivering the page to the person's browser. Caching technology stores heavily requested information in the company's Web site system, so the Web sites don't have to retrieve and download the information each time someone asks for it.

Currently, caching technology handles "static" Web pages, or Web content that doesn't change. But Persistence's software can handle Web content that changes repeatedly, such as stock quotes and prices of online auction items, said Persistence chief executive Chris Keene.

Giga Information Group analyst Joel Yaffe said Persistence's technology is unique. "If a stock quote changes every second, the data is beamed out to thousands of users each time," he said. "But instead of having each request go through the Web site and the data pulled from a database, the information can be cached."

Yaffe said service providers and other Web caching firms also are developing the technology. Akamai, which hosts small pieces of Web sites, such as Yahoo or CNN.com on its network, is developing a new service called EdgeAdvantage, which can support e-commerce transactions.

Persistence is hoping the new caching software will double the company's revenue eventually. The company, which went public last summer, historically has competed against IBM, Microsoft, Oracle and dozens of others in the lucrative but crowded market for application servers, software that runs the transactions of e-commerce Web sites.

The firm this week reported a first-quarter loss of $5.1 million, or 27 cents a share, compared to a loss of $1.9 million, or 13 cents a share during the same period last year. First-quarter revenue was $4.2 million, up 47 percent from last year's first-quarter sales of $2.9 million.

The company has beat Wall Street analysts' earnings estimates the past two quarters, after missing estimates three quarters ago.

Analysts say Persistence has a good shot at succeeding in the caching market because the market is still emerging. Database software maker Oracle also is planning to enter the caching market with software that will let companies easily replicate Web site information stored in databases.

"Everyone is trying to solve the same problem," said Jupiter Communications analyst Peter Christy. "The content distribution space is evolving and expanding, and we expect a lot of technology innovation."

Yaffe agrees, and sees Persistence as a potential partner of Akamai's or Inktomi's, rather than a competitor.

"I am sure all the major service providers are trying to develop this capability in-house as well as examining technology developments by other companies," Yaffe said. "The real question is: How difficult will it be for any one company to develop this capability? Obviously, the folks at Persistence believe there is a non-trivial amount of expertise and time required to develop the technology."