Yahoo! to buy Inktomi

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Yahoo! is acquiring search engine firm Inktomi in a deal worth $235m (£147m), the companies said on Monday. Yahoo! will pay $1.65 for each share of Inktomi, which closed at $1.17 on Friday. The total value of the deal includes an adjustment for Inktomi's cash balance and debt balance. The deal is expected to close in the first quarter of 2003. Inktomi recently completed the sale of its corporate search business to Verity for about $25m in cash. The sale of the business unit was supposed to free Inktomi up to focus on its consumer business. Inktomi has faced increased competition from companies, most notably Google. The company recently let go 20 percent of its work force. Inktomi currently has deals to supply search services to Web sites including MSN.com and About.com. Yahoo!, which maintains its own category-driven directory, recently signed a deal with Google and Overture to display advertising linked to keywords in searches on its Japanese site. In October, Yahoo! said it extended into the long term a deal to carry Google's search listings as a backup for its own search directory, but did not provide a time frame. Yahoo! chief executive Terry Semel said in a release that the Inktomi purchase would add "both control and flexibility" to the search business, thus "enhancing our ability to create new and more innovative search offerings for consumers and business." But the companies did not explicitly say how the Inktomi search would be combined with Yahoo!'s service, and what impact the deal would have on Yahoo!'s deals with Google. Company officials could not immediately be reached for comment. Inktomi lost $41.5m, or 29 cents per share, in fiscal 2002, on sales of $112.7m, excluding charges for real estate and asset impairment charges, restructuring charges, and commerce division activity, among other charges. But Yahoo! said it expected the deal to boost its earnings per share within 12 months of closing.
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