Inktomi sells corporate search assets

Software company Verity said Wednesday that it will buy Inktomi's corporate search business for about $25 million in cash.

Sunnyvale, Calif.-based Verity makes software that helps large organizations manage and share information over a central network, or intranet. By acquiring Foster City, Calif.-based Inktomi's technology assets for corporate search, Verity adds to its arsenal an entry-level tool for businesses with smaller needs.

Under terms of the deal, Verity will acquire the assets related to Inktomi's enterprise search software business, including XML (Extensible Markup Language) technology and basic search and data categorization tools. The deal will also give Verity access to Inktomi's 2,500 existing customers and will offer employment to Inktomi's current staff.

The deal is expected to close in the next 30 to 60 days. Verity expects the deal will be accretive to earnings per share within the first six months following its close.

The acquisition comes as competition in the corporate search market is heating up. A number of companies are racing to provide advanced tools to answer a need for search tools in business environments. Verity, as well as rivals Autonomy and Convera, develops software that lets companies index, classify, search and retrieve data stored in multiple formats, including HTML (Hyptertext Markup Language) and PDF (portable document format) files. But the software and systems have yet to be perfected, and each company is gunning to become the de facto technology in corporate search. Even top Web search service Google has entered the market by introducing a corporate search appliance earlier this year.

The deal also comes only weeks after Inktomi introduced a new version of its Web search technology for businesses, called Inktomi Enterprise Search 5.0.

For Inktomi, the buyout will clip a business that it does not have the resources to support or nourish. Like many of its Internet brethren, the once high-flying Inktomi has been going through hard times. In October, the company slashed 20 percent of its work force, or 85 positions. It also reported a quarterly loss of $131.6 million including charges, as well as a loss of $500.8 million over the past 12 months.

The acquisition gives the struggling search provider an additional $20 million to $25 million in the bank and will help it become cash flow and EBITDA positive by the end of the calendar year, according to Inktomi CEO David Peterschmidt.

"This gives us a singular focus on our original core competency, Web search, which is the deepest of all the technologies out there," Peterschmidt said, adding that the company plans to release a new product next week.

Inktomi makes money by selling large-scale marketers, such as Amazon.com and eBay, the ability to have their Web pages refreshed more often in its index.

For Verity, whose customers include Cap Gemini, the acquisition was a matter of appealing to a wider corporate market.

"The assets and customers Verity will be acquiring should enable us to better compete across the full spectrum of the enterprise search market and in key geographies around the globe, while continuing to build upon our business success," Gary J. Sbona, Verity's CEO, said in a statement.