Wall Street loves the Internet -- again.
After giving online stock offerings a cold shoulder for most of
last year, investors are giving a warm reception to this year's crop
of Internet initial public offerings. Yesterday, investors furiously
snapped up Inktomi Corp. shares in the company's first day of public
trading.
Inktomi develops search-engine technology and software to police
Web traffic.
The San Mateo startup's stock doubled to $36 in brisk trading,
fueling a market value of $739.15 million and making instant
millionaires of its co-founders, Eric Brewer, 31, and Paul Gauthier,
25.
When the pair started Inktomi in 1996, Brewer was a professor of
computer science at the University of California at Berkeley and
Gauthier was a graduate student in the same department.
Inktomi originally had expected sales of its 2.25 million shares
to debut at $12 to $14 per share, but its lead underwriter Goldman
Sachs & Co. raised that range to $16 to $18 on Tuesday amid a
ravenous rush on Internet stocks.
``The recent stock run-ups of search-engine companies indicate a
new wave of successful Internet IPOs,'' said William Marbach,
managing editor of Venture Finance, a New York newsletter that covers
the high-tech IPO market.
``We're seeing the opposite effect from a year ago, when the
struggling stocks of Yahoo, Excite and others put a damper on
potential stock offerings,'' Marbach said.
The recent upturn in Internet-related stocks has created a more
favorable climate for Internet IPOs and was a significant factor
behind the successful stock offerings this year of VeriSign, a
Mountain View-based e-commerce company; CDnow, an online seller of
compact discs and videos; and DoubleClick, an Internet-advertising
specialist in Palo Alto.
Inktomi (a Lakota Indian word meaning ``wit and cunning'') is best
known for supplying technology to Wired Digital that was used to
create the HotBot search engine.
But it became a hot IPO candidate after signing several similar
deals with other high-profile Internet players.
Yahoo recently picked Inktomi to replace Alta Vista as the search
engine underlying its navigational guide. Inktomi software powers
Cnet's Snap!, the search service in which NBC bought a 19 percent
stake Tuesday -- with an option to buy 60 percent for $38 million.
(NBC also bought 5 percent of Cnet for $26 million.)
And Inktomi has an agreement to provide search-engine technology
for Microsoft Corp.'s forthcoming ``Start.com'' super site.
Inktomi also makes Traffic Server software that helps Internet
service providers and telecommunications companies bypass online
gridlock. The product relies on network-caching technology, which
lets Web browsers store the most frequently viewed pages, images and
sounds in temporary files that are easily accessible from a desktop
computer.
``This is a hot stock that everyone has been closely watching,''
said Jim Breyer, managing partner at Palo Alto venture capital firm
Accel Partners. ``Inktomi benefitted tremendously from the NBC-Cnet
deal, which further verifies Internet stocks.''
However, Breyer cautioned that investors should not expect the
next round of Internet IPOs to match the success of Inktomi.
``The question at the end of the day is whether some of these
stocks are overvalued.''
