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Inktomi adds to Web service arsenal

Inktomi, which supplies software and services to Internet service providers, agrees to buy WebSpective for $106 million in a stock swap.

Inktomi, which supplies software and services to Internet service providers, today agreed to buy privately held WebSpective for $106 million in a stock swap.

The deal is expected to boost Inktomi's current product portfolio, which includes a search engine, an online shopping mechanism, and a utility for monitoring Web site traffic.

WebSpective, based in Needham, Massachusetts, makes a content distribution program for solving a common problem facing ISPs: the performance of Web pages and other data spread out across multiple servers. The software lets ISPs better manage this content and helps get it to users more quickly.

"A lot of Web hosters want to be into the content distribution business and get into the business of providing the service for distributed content," said Inktomi chief executive David Peterschmidt. "What we have done is completed a circuit for the make versus buy decision for Web hosting companies."

Inktomi is looking beyond the Internet to corporate networks. The company believes "the enterprise market for network caching will open up by the end of this year, and content distribution will be very important there, too," Peterschmidt said.

"One of the emerging areas in Internet infrastructure is how do you distribute that content," said Robert Fagin, Internet technologies analyst with Bear Stearns.

A number of companies provide these services already, but Inktomi will be able to offer more with WebSpective, Fagin explained.

"What Inktomi is allowing right now is the same functionality if you want to build that yourself," Fagin said. "This is something many of their traffic server customers would love."

Inktomi expects the merger to go smoothly, because the sales forces of the two companies already have been working together. Some of Inktomi's major customers used WebSpective's content distribution software alongside its network caching product.

Full integration of the products is expected by the end of the year.

Inktomi expects no major layoffs after the acquisition and plans to keep open WebSpective's base operations in Needham, Massachusetts. Inktomi is located is Foster City, California.

The announcement follows other recent acquisitions, such as the Impulse Buy Network. Inktomi posted a third fiscal quarter loss of $6.3 million, or 13 cents a share, in part due to acquisition-related charges of $1.1 million.

For the quarter ended June 30, Inktomi reported revenues of $19.6 million, a 212 percent increase over $6.3 million a year earlier.

The companies expect to close the deal next quarter, with Inktomi acquiring all WebSpective stock.