NEW YORK (CNNfn) - Internet software company Inktomi Corp. said it is expanding into the wireless Internet infrastructure business by forging alliances with seven other technology companies.|
Inktomi, based in Foster City, Calif., makes software that enables computer networks to serve Web pages and other requests from users more rapidly. It does this using a technology called caching. In addition, Inktomi technology powers the search engines of several major Internet directories, including those run by Yahoo! and Microsoft Corp.
In the past, Inktomi has marketed its caching software to telephone companies and Internet service providers. Its Traffic Server product is designed to handle the massive increase in traffic going over traditional phone networks because of the Internet's explosive growth. With the alliances Inktomi announced Tuesday, the company aims to take that same expertise to wireless companies.
"The alliances are a logical extension of the great infrastructure franchise they have built in the wireline Internet market," said John Powers, an analyst at Robertson Stephens. "Inktomi's ability to help provide a quality Web experience will be at least as relevant in wireless as in the regular wired world," he said.
Inktomi indicated that it would form alliances in the wireless Internet area at the Robertson Stephens Technology Conference in San Francisco in late February.
Access to the Internet through wireless phones is expected to rocket over the next several years. The Cellular Telecommunications Industry Association projects that in five years 830 million wireless devices will be active globally to access the Internet. Sprint PCS is one of the wireless carriers already offering Internet access over its phones.
One of the alliances Inktomi announced today was with AirFlash Inc., a 35-person, private company founded in 1998 that makes applications for the delivery of content and commerce services over mobile phones. The combination of technology from Inktomi and AirFlash will enable wireless phone companies to provide consumers with content relevant to a user's actual location, such as yellow pages, restaurants, hotels, traffic reports, and driving directions.
Inktomi (INKT: Research, Estimates) will make an undisclosed investment in AirFlash, the only cash investment Inktomi is making in the alliances announced Tuesday. The other deals are partnerships, which limits Inktomi's financial risk if wireless Internet access fails to take off.
"The wireless alliances are a hedge for Inktomi," said Martin Pyykkonen, an analyst at CIBC Oppenheimer. "If wireless Internet access doesn't take off, they haven't wasted a lot, so it's a no-brainer for them."
Other alliances Inktomi has agreed to include deals with: Portal Software (PRSF: Research, Estimates), a maker of billing systems for wireless communications companies; CAP Gemini, one of the world's largest management consulting and systems integration companies; computer maker Hewlett-Packard Co. (HWP: Research, Estimates); workstation and software company Sun Microsystems (SUNW: Research, Estimates); Internet consulting firm Spyglass Inc. (SPYG: Research, Estimates); and Gwcom, the largest wireless destination site in China and the operator of a wireless stock trading service.
Inktomi's stock has rocketed over the past several days, partly in response to investors' enthusiasm about its entry into the wireless area. It rose to 202-1/64 today from 169 on March 10. Spyglass stock also rose today in response to the announcement, gaining 13-15/16, or 7.4 percent, to 202-5/16 in late afternoon trading.