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Inktomi beats analysts' expectations again

The search and caching technology provider beats expectations for the third quarter running, boosted by revenue growth and advances by its search technology arm in Europe.

Search and caching technology provider Inktomi beat expectations today for the third quarter running.

Inktomi lost $4.6 million, or 9 cents per share, beating Wall Street's expectations of a 12-cent-per-share loss, according to First Call. Inktomi's net loss was smaller that the loss of $4.8 million, or 13 cents per share, in the same quarter a year ago. Revenues of $14.6 million were up sharply from $3.5 million for last year's quarter.

Inktomi chief executive David Peterschmidt emphasized the company's 323 percent revenue growth in announcing the earnings, also noting advances in Europe for the search technology arm of the business and momentum for the company's new Shopping Engine e-commerce product for comparing products online.

"I think the earnings were spectacular," said Peterschmidt. "Search continues to grow at a very healthy rate. We added eight new customers, where we usually add two or three, so now no one single company represents more than 10 percent or our search revenue."

For its search technology, Inktomi added licensees including BellSouth and Yahoo Japan and signed a deal with British Telecommunications to resell search services in Europe. The company added premium services and signed on with WorldBlaze to provide translation. Search queries handled by Inktomi were up 22 percent to 2.2 billion from 1.8 billion last quarter.

The Search Engine is in previews at more than 20 sites, including portals Infoseek and Snap, which is a joint venture between NBC and CNET: The Computer Network, publisher of News.com. Snap is also a search technology licensee. The Shopping Engine will launch officially in the third quarter.

Peterschmidt noted that while Microsoft announced it would withdraw as an Inktomi customer, their agreement had not yet been formally terminated, and Inktomi expects to provide service to Microsoft's MSN site until well into the summer.

Peterschmidt also lauded his company's performance in network caching and in the nascent Shopping Engine, particularly the fact that the yet-to-be finalized product already has 20 customers, while it took the company years to assemble half as many search clients.

Inktomi's network caching product, Traffic Server, handled 2.5 billion requests for America Online and added customers including CNN, bringing the total number of customers to 20 firms around the world. The company also launched a services wing to assist companies in implementing caching technology.

Caching lets high-volume Web sites keep copies of frequently accessed pages closer to the client in order to conserve bandwidth. Sites can specify what parts of a Web page can and cannot be cached in order to ensure fresh content.

Analysts applauded Inktomi's performance for the quarter.

"Their revenue upside and expense control were better than people were expecting," said Kris Tuttle, analyst with SoundView Technology Group. "Their numbers were very, very good, and that's with their stating them as conservatively as possible."

Tuttle said Inktomi was likely to experience most of its near-term growth with the network products line, but that next year should see an upswing in portal services as the Shopping Engine is deployed more widely.

One pitfall facing Inktomi is increased competition in the network caching space. Inktomi alluded to this looming threat in discussing the earnings with analysts after the announcement, according to Tuttle.

"In the next several months there should be an increase in the rhetoric with respect to network caching, and we've already seen a bit of it from companies in the market," Tuttle said. "It's going to get more intense as more competitors make more claims and set new benchmarks, which will make people ask about Inktomi's product positioning.

"But Intomi's product has been on the market for well over a year, before these new companies even existed. It should be difficult to catch them now."

Inktomi also announced today that it will launch a fourth application. Peterschmidt declined to elaborate on that product except to say that it will fall along with search and the Shopping Engine under the portal services side of the company's business.

Inktomi was down sharply today on Wall Street in advance of the earnings announcement, dropping 17.81, or 13 percent, to close at 119.19.