Yahoo buys Inktomi for $235M for search assets

December 23, 2002 —

Yahoo Inc. has purchased Inktomi Corp. for about US$235 million, the companies announced Monday. Yahoo will add Inktomi's Web search technology to its portal sites in hopes of becoming the premier destination for Web searches, it said.

Inktomi's search technology is used by several businesses to allow searches of their sites and the Web in general. Yahoo will use its technology for both purposes, said Jeff Weiner, senior vice president of search and marketplace at Yahoo.

"Our objective is to provide the highest quality search experience, and to be the leading provider of search (technology) on the Internet," he said.

Inktomi, based in Foster City, California, has deals with Amazon.com Inc., eBay Inc., and Microsoft Corp.'s MSN.com portal, according to its Web site.

Yahoo currently uses technology from Google Inc. as the back end of its search engine. Google's technology is not going away, but Yahoo feels that it can provide a better searching experience to its users if the company uses in-house engineers and assets instead of licensing technology from another company, Weiner said.

Inktomi's search technology was included in the recent launch of Yahoo competitor Terra Lycos SA's new HotBot search site. Yahoo is committed to Inktomi's affiliate agreements, Weiner said.

Yahoo's prospects are looking increasingly better after doubts about its sustainability emerged during the dot-com crash and advertising slump of the past year. The Sunnyvale, California, company's third-quarter results were better than expected, and a recent report suggested the online advertising market is showing signs of rebirth.

Inktomi's paid-inclusion technology will add to Yahoo's revenue. Inktomi's program places paid advertisers into a pool, then ranks the pool members by relevance to a user's search terms, as opposed to Yahoo's current pay-for-placement service run by Overture Services Inc., which ranks search results according to who paid the most, Weiner said.

Like Google's technology, Overture's services will remain part of the new Inktomi-Yahoo search page, Weiner said.

Yahoo's stock (YHOO) was up $0.41, or 2.39 percent, to $17.49 in late morning trading. Inktomi's stock (INKT) was up $0.43, or 36.75 percent, to $1.60 on news of the deal. The deal reflects a purchase price of $1.65 per share for Inktomi, Yahoo said.

Inktomi has approximately 140 employees remaining after the sale of its enterprise search business to Verity Inc. in November. It's too early to know exactly how current Inktomi employees will be affected by the deal, Weiner said.

ITworld.com