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Spider Man

Supplying cutting-edge network applications to Internet service providers and major media companies may not garner a high degree of public …

Supplying cutting-edge network applications to Internet service providers and major media companies may not garner a high degree of public name recognition, but that’s the way Inktomi CEO David Peterschmidt prefers it. Much like its namesake-the “trickster spider” of Lakota Indian legend-Inktomi thrives behind the scenes, helping to build up clients like America Online, @Home, CNET, Intel, RealNetworks, Sun Microsystems, and Yahoo! by licensing them the customizable search engines, comparative shopping engines, and traffic server network caching they need to remain vital Web destinations.

While providing straight Internet access continues to be the most popularly recognizable form of revenue on the Internet, San Mateo, CA-based Inktomi is at the forefront of a movement that looks to use Internet access only as a means of subsidizing a future customer base for value-added services. “I want our software to be used everywhere to power the movement and the location of content,” says Peterschmidt, who plans to build Inktomi into the Internet’s dominant infrastructure software company and the segment’s leading technology innovator.

Peterschmidt first fell for Inktomi’s central technology platform back in early 1996, soon after leaving Sybase, where he served as CEO before a rift with management led to his departure. When approached to run Inktomi, he quickly saw that the company’s technology—-an outgrowth of federally funded computer science research done at the University of California at Berkeley-could be the foundation upon which the Internet would grow bigger and faster.

With a handful of employees holed up above a candy store in downtown Berkeley, Peterschmidt set about raising money while simultaneously building a management team and bringing in outside consultants to develop a long-term plan. Drawing on experience gleaned from years in the computer service and semiconductor distribution industries, he streamlined spending and employed the same processes at Inktomi that he used to grow Sybase’s revenues from $60 million to almost $1 billion in four years.

The results have industry analysts standing at attention. With a market capitalization of more than $6 billion, Inktomi’s revenues for the quarter ended March 31 were $14.6 million-a growth burst of nearly 300 percent from the same period last year and roughly 30 percent growth from quarter to quarter. While the firm remains in the red, analysts predict profitability by September of 2000.

Inktomi receives an ongoing annuity revenue stream from the portals that contract its search and shopping engines and a quarterly revenue jump based on enterprise license sales of its caching services. With 38 clients now relying on at least one of its three scalable network applications, losses have been shrinking each quarter, and analysts say Peterschmidt has Inktomi headed in the right direction.

“His execution to date has been great in terms of the team he’s built up in the firm,” says Goldman Sachs financial analyst Rakesh Sood. “In terms of motivating the troops and marching them, evidence suggests he’s doing the right things.”

“There are untold billions in the search and shopping engine market they’re addressing, and what they’re doing benefits the Internet overall,” adds Sood, who says the caching industry alone represents a $1 billion opportunity over the next three to four years.

As demand builds, Peterschmidt is busy extending Inktomi’s web of products into new areas-as evidenced by the recent addition of Traffic Server 3.0 to Inktomi’s proprietary search and shopping engine offerings. “No other company is doing what Inktomi’s doing with the caching platform,” says Greg Howard, chief industry analyst at the HTRC Group. “They’ll remain an industry leader based on how they’re redefining the caching category.”

Back when Inktomi began its network cache project, Peterschmidt recalls, few people understood or had even heard of network caching. “There were no such things as network caches, but today that market is projected to be between $2 billion and $4 billion by 2002,” he says. “Last Christmas, $8 billion in goods were purchased on the Internet, and the projection for this year is $41 billion.”

With little competition from firms offering search and shopping engines on an OEM basis-particularly after Inktomi acquired rival C2B technologies late last year-Inktomi’s biggest competitive threat may be internal development at the major portals. But Peterschmidt intends to stay ahead by continually building out each engine’s feature or, if necessary, stealthily attacking their enemies like a spider.

“Part of our culture here is we’re very big on water guns,” he says. “We’ve even got legitimate published procedures from our CIO on how to recover your desktop computer after a severe water gun fight.” Good thing.


Chairman, President, and CEO


‘Part of our culture here is we’re big on water guns.’

Age: 51

Birthplace: Fort Madison, IA

Family: Married, two children

Education: BS, University of Missouri, 1969; MBA, Chapman College, 1975.

First Job: Changing mufflers, batteries, and tires at Sears.

Most Recent On-line Purchase: Artwork from a Canadian naturalist.

Preferred brand of water gun: Super Soaker

About Michael Gelfand