Microsoft returns to Inktomi for search services

MSN will use Inktomi's technology for general Internet search queries and site-specific search results.

The deal comes nearly one year after Microsoft announced it would drop Inktomi as its back-end search provider, opting for AltaVista instead. At that time, Microsoft inked a deal with AltaVista to use its search services on its site in exchange for AltaVista licensing the company's free email service, MSN Hotmail.

For Inktomi, the deal today represents a win, since it regained a high profile contract that it had lost.

"We felt that the opportunity would present itself for us to get back and have that full relationship again," said David Peterschmidt, chief executive at Inktomi. "What we did was we stayed with Microsoft all the way through, and over time they basically came back to us."

Microsoft's decision to use AltaVista coincided with an announcement by Compaq, which owned AltaVista at the time, to spin out AltaVista with the intention to take it public. Instead, CMGI acquired AltaVista this summer for $2.3 billion and plans to take the service public. CMGI also has launched a multimillion dollar advertising campaign to turn AltaVista into a challenger to Yahoo and other Web portals.

According to Deanna Sanford, lead product manager for MSN, the decision to switch back to Inktomi stemmed partially from the changes at AltaVista.

"Based on AltaVista's recent ambitions to become more of a portal and less of a search directory, we thought it would be better to work with a company whose core business model is focused on search," Sanford said.

But there are still some loose ends from the original deal between Microsoft and AltaVista: The search engine still has not begun using Hotmail on its service. Sanford added that the companies are still in talks over whether to distribute Hotmail through AltaVista.

Inktomi's stock reacted favorably to the news today, up 10.81 to close at 178.56.