Inktomi files to go public

Inktomi, the software company that has struck deals with Microsoft, America Online, and Intel for caching and search technologies, today filed to go public.

It is the latest example of a technology start-up

Inktomi's business partners

America Online Digex Digital Intel Nippon Telegraph Microsoft Sun Wired

cashing in on the hot IPO market. It also is a case in which an IPO is likely to make millionaires out of some of the Ph.D.s and scientists who came up with a hot technology that is being snapped up by giants such as Microsoft and AOL--the kind of story that has made Silicon Valley famous.

Inktomi's founders include UC-Berkeley computer scientists, and its investors include venture capital firm Oak Investment and chip giant Intel.

Founded in February 1996, Inktomi gets its name from a Lakota Indian legend about a spider character known for his ability to defeat larger characters through wit and cunning. In this instance, the start-up is bringing parallel computing technology to the Internet, but faces intense competition from the likes of Excite, Lycos, Digital, Cisco, IBM, Hewlett-Packard--and Microsoft.

According to a regulatory filing with the Securities and Exchange Commission, the proposed maximum offering price is $35.42 million. It is estimated that the stock will be priced between $12 and $14 per share. The filing is for 2 million shares, plus 200,000 being sold by selling stockholders, with up to an additional 330,000 shares to cover over-allotments.

Inktomi expects to have 20.5 million shares outstanding after the offering, so the 2.2 million shares would amount to a 10 percent stake in the company. At $12 to $14 per share, Inktomi would have an implied market value of between $246 million and $287 million.

The underwriters include Goldman Sachs, BT Alex. Brown, and Hambrecht & Quist. The stock would trade on the Nasdaq under the ticker symbol "INKT."

According to the filing, the company posted a net loss of $3.5 million from February 2, 1996 (its inception) to September 30, 1996. For the fiscal year ended September 30, 1997, Inktomi lost $8.7 million. During that same fiscal year, however, it generated revenues of $5.8 million.

"The company has not achieved profitability on a quarterly or annual basis, and the company anticipates that it will incur net losses for at least the next several quarters," the filing said.

The filing also referred to the intense competition that Inktomi faces.

The purpose of the offering is to create a public market for the stock and improve the company's financial position, the filing said. Inktomi does not plan to pay a dividend.

Inktomi expects that its executive officers, directors, and "entities affiliated with them" will own about 45 percent of the company's outstanding stock following the IPO. As of last month, Inktomi had 88 employees.

After the filing, Oak Investment Partners will hold a 15.6 percent stake in Inktomi; UC Berkeley professor Eric Brewer, 31, Inktomi's chief scientist and one of its founders, will hold an 11.3 percent stake; and Peterschmidt, 50, the CEO, will hold a 4 percent stake. (Peterschmidt previously was chief operating officer of Sybase).

Although Inktomi's technology is being used for Microsoft's Internet search service, the software giant is loaning the price of new workstations and related software and hardware being purchased to service its capacity needs.