Verity Buys Inktomis Enterprise Search Business

Verity will acquire Inktomi's fading enterprise search software business in a cash deal worth $25 million.

Verity Inc. announced Wednesday that it will acquire Inktomi Corp.s fading enterprise search software business in a cash deal worth $25 million.

Inktomi will remain in business and will focus exclusively on the Web search engine space, which has been a much stronger performer for the company for the past year.

The acquisition will give Sunnyvale, Calif.-based Verity, a developer of search and information management applications, more technology in the basic search area, according to Verity officials.

"Were extending our product offering to meet the ever-growing needs of the enterprise customer base we serve," said Verity Chairman and CEO Gary Sbona. "Were competing for a growing number of customers who need enterprise search capabilities."

With the acquisition, Verity gets Inktomis Enterprise Search (formerly known as UltraSeek) suite, which includes basic search, content refinement and categorization, as well as its XML toolkit. Those products create a revenue stream of $20 million a year and a customer base of 2,500, Verity officials said.

Verity also gets 40 Inktomi employees, who will continue to develop and sell Enterprise Search.

"Well draw definitive boundaries across the product lines and make sure theres a natural migration path to [Verity] K2 Enterprise," said Anthony Bettencourt, Veritys president.

Bettencourt said K2 users will also get access to the Inktomi repository, in addition to the other data sources they can presently access.

The acquisition will take Verity into a marketplace, for basic search, it has had difficulty accessing with its higher-end search and information management products, Bettencourt said.

"This is still a pretty competitive marketplace," Bettencourt said. "UltraSeek should give us a solid footing in the basic search marketplace where weve struggled with our higher-end products."

Bettencourt said the categorization technology Verity is getting, which Inktomi acquired from Quiver Inc. in July, will add "tremendous workflow capabilities" to Veritys categorization and taxonomy technology.

Inktomi, meanwhile, will focus exclusively on its Web Search service, which is sold to portals and destination sites such as America Online Inc. used to use Inktomis Web search service for its online service, but replaced it with Google Inc.s service earlier this year.

"The sale of our enterprise search business to Verity puts Inktomi in a much stronger financial position while enabling the company to apply all its resources on a growing market in which it has leading technology, distribution and marketing services," said David Peterschmidt, president and CEO of Foster City, Calif.-based Inktomi, in a statement.

Inktomi in its fiscal fourth quarter ended Sept. 30 lost $131.6 million on $20.4 million in revenues. Its Web search business accounted for $11.5 million, down only slightly from the $12 million it brought in the same period a year ago.

But Inktomi saw a steep decline in software license revenues in the last quarter, which fell from $17.8 million to $4.2 million year-to-year. For the entire fiscal year, software license revenues fell from $106.7 million to $41.2 million, while Web search service revenues dropped only from $51.3 million to $47.1 million.

The deal is expected to close within the next 30 to 60 days.