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INKTOMI CORPORATION

          

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FOR IMMEDIATE RELEASE

Contacts:
Investor:		Press:
Shernaz Daver		Christy Peters
(650) 653-2859		(650) 653-3090
sdaver@inktomi.com		cpeters@inktomi.com

Inktomi Reports First Quarter Fiscal 2003 Results

FOSTER CITY, Calif., January 16, 2003 — Inktomi Corp. (NASDAQ:INKT) today reported financial results for the first quarter of fiscal year 2003 ended December 31, 2002. Revenues for the fiscal quarter were $13.9 million, excluding revenues from Inktomi’s enterprise search business, which was sold to Verity in the quarter. Pro-forma net loss was $1.4 million or a loss of $0.01 per share.

Pro-forma amounts exclude non-recurring items including real estate and asset impairment charges, losses on asset sales, restructuring charges, enterprise search discontinued operations, rental sublease income on our Bayside corporate headquarters, and a recovery from a prior period write-off. The GAAP net loss from continuing operations for the first fiscal quarter was $24.4 million, or a loss of $0.15 per share. The GAAP net loss including discontinued operations was $17.0 million, or a loss of $0.10 per share.

In the first fiscal quarter, revenue was primarily comprised of $10.0 million from Inktomi’s Web search business. The company also reported $3.9 million of revenue from the content networking business.

In the first fiscal quarter, Inktomi completed the sale of its enterprise search business to Verity for $25.0 million, of which $22.0 million in cash was paid to Inktomi in December and $3.0 million is expected to be paid in June 2004, potentially offset by any indemnification claims that may arise during the interim period. The profit resulting from discontinued operations of the enterprise search business in the quarter was $7.5 million, reflecting revenues of $3.6 million, costs and expenses of $8.5 million, and a gain of $12.4 million on the sale of the business to Verity.

In the quarter, Inktomi completed the sale of its Bayside corporate headquarters for $41.5 million. In addition, the company reduced its total outstanding notes payable and capitalized leases by $28.0 during the quarter to $3.4 million outstanding at December 31, 2002. Inktomi ended the quarter with total cash, cash equivalents and short-term investments of $59.1 million.

On December 23, 2002 Inktomi and Yahoo! entered into a definitive agreement under which Yahoo! will acquire Inktomi for a purchase price of $1.65 per share in cash.

 

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About Inktomi

Based in Foster City, Calif., Inktomi is the leading provider of OEM Web search and paid inclusion services. A pioneer in Web search technology, Inktomi provides millions of users worldwide with the freshest and most relevant search experience, and ensures that thousands of online retailers have their content constantly represented. The company’s customers and partners include Amazon.com, eBay, Lycos/HotBot, MSN, Overture and WalMart.com.

This press release contains forward-looking statements regarding Inktomi’s future financial and operating results and Yahoo!’s proposed acquisition of Inktomi. These statements are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from those projected in any forward-looking statements. Factors that could affect our financial and operating results include our need to improve our sales and distribution capabilities, internally and through alliances; substantial competition; risks related to the consolidation of operations and reductions in force; dependency on a small number of portal customers in the Web search business; the rapidly changing business environment; changing buying patterns of our customers and potential customers; need to develop, acquire and release new products and technologies; and risks associated with acquisitions, dispositions, strategic alliances, international operations and product release dates. The potential risks and uncertainties relating to the proposed merger include, among others, the possibility that the transaction will not close or that the closing may be delayed and the reaction of customers of Inktomi to the transaction. For more information and additional risk factors regarding Inktomi generally see “Factors Affecting Operating Results” contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 30, 2002 and in other reports filed by Inktomi with the SEC. Inktomi expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any statements to reflect any change in Inktomi’s expectations or any change of events, conditions or circumstances on which any such statements are based.

Inktomi filed a preliminary proxy statement and other documents regarding the proposed merger described in this press release with the SEC on January 10, 2003. INKTOMI STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. A definitive proxy statement will be sent to stockholders of Inktomi seeking their approval of the transaction. Investors and security holders may obtain a copy of the proxy statement (when it is available) and any other relevant documents filed by Inktomi with the SEC for free at the SEC’s web site at www.sec.gov. Copies of the definitive proxy statement and other documents filed by Inktomi with the SEC may also be obtained free of cost by directing a request to: Joe Eandi, Vice President and General Counsel, Inktomi Corporation, 4100 E. Third Avenue, Foster City, CA 94404; (650) 653-2800.

Inktomi and its directors and executive officers may be deemed to be participants in the solicitation of proxies of Inktomi stockholders in connection with the proposed merger. Such individuals may have interests in the merger, including as a result of holding options or shares of Inktomi common stock. A detailed list of the names, affiliations and interests of the participants in the solicitation is set forth in the preliminary proxy statement that was filed with the SEC on January 10, 2003 and will be set forth in the definitive proxy statement when it becomes available.

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Copyright © 2003 INKTOMI CORPORATION. All Rights Reserved. Inktomi and the tri-colored cube logo are trademarks or registered trademarks of Inktomi Corp. in the United States and other countries. All other names are trademarks, registered trademarks or service marks of their respective owners.

 

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Inktomi Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
(In thousands, except per share data)

				For the Three
				Months Ended
				December 31,
				2002				2001
Revenues
	Web search services			$	9,975			$	10,628
	Licenses				1,810				17,440
	Maintenance services				1,720				2,481
	Other Services				350				2,544
		Total revenues			13,855				33,093
Cost of Revenues
	Web search services				2,881				4,277
	Licenses				585				329
	Maintenance services				477				1,118
	Other Services				368				1,880
		Total cost of revenues			4,311				7,604
Gross Profit					9,544				25,489
Operating expenses
	Sales and marketing				2,943				17,988
	Research and development				5,087				12,925
	General and administrative				3,126				7,110
	Amortization of goodwill and other intangibles				—				16,709
		Total operating expenses			11,156				54,732
Operating loss					(1,612	)			(29,243	)
Other income, net					220				609
Pretax loss					(1,392	)			(28,634	)
Income tax provision					(27	)			(199	)
Net loss				$	(1,419	)		$	(28,833	)
Earnings per share
Basic and diluted net loss per share				$	(0.01	)		$	(0.21	)
Weighted average shares outstanding
Shares used in calculating basic and diluted net loss per share					162,284				136,660

Pro forma amounts exclude non recurring items such as restructuring costs, impairment of goodwill and other intangibles, real estate impairment charges, gain from discontinued operations, impairment of fixed assets and loss on asset sale, and Bayside headquarters rental sub-lease income. In prior period press releases, non cash items were also excluded. Prior period pro forma amounts have been restated to conform to current period presentation.

For the quarter ended December 31, 2002, the following amounts were excluded from pro forma results:

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(a)		$18,854 of restructuring costs
(b)		$5,358 of fixed asset impairment and loss on asset sale
(c)		$7,487 was excluded for gain from discontinued operations
(d)		$507 was excluded from other income relating to previous one-time charges
(e)		$685 Bayside headquarters rental sub-lease income

For the quarter ended December 31, 2001, the following amounts were excluded from pro forma results:

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(a)		$4,012 of restructuring costs
(b)		$1,750 of impairment of goodwill and other intangibles
(c)		$2,754 was excluded from other income relating to previous one-time charges
(d)		$1,931 Bayside headquarters rental sub-lease income
(e)		$469 was excluded for gain from discontinued operations

 

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Inktomi Corporation
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share data)

					For the Three
					Months Ended
					December 31,
					2002				2001
Revenues
		Web search services			$	9,975			$	10,628
		Licenses				1,810				17,440
		Maintenance services				1,720				2,481
		Other Services				350				2,544
			Total revenues			13,855				33,093
Cost of Revenues
		Web search services				2,881				4,277
		Licenses				585				329
		Maintenance services				477				1,118
		Other Services				368				1,880
			Total cost of revenues			4,311				7,604
Gross Profit						9,544				25,489
Operating expenses
		Sales and marketing				2,943				17,988
		Research and development				5,087				12,925
		General and administrative				3,127				5,179
		Amortization of goodwill and other intangibles				—				16,709
		Restructuring				18,854				2,712
		Impairment of fixed assets and loss on asset sale				5,358				1,300
		Impairment of goodwill and other intangibles				—				1,750
			Total operating expenses			35,369				58,563
Other income, net						1,413				3,363
Total Expense and Other Income						33,956				55,200
Income from continuing operations before income taxes						(24,412	)			(29,711	)
Income tax provision						(27	)			(199	)
Income from continuing operations						(24,439	)			(29,910	)
Discontinued Operations
	Income from discontinued operations					7,487				469
Net income					$	(16,952	)		$	(29,441	)
Earnings per share
Basic and diluted net loss per share
	Continued operations				$	(0.15	)		$	(0.22	)
	Discontinued operations					0.05				0.00
	Net loss per share				$	(0.10	)		$	(0.22	)
Weighted average shares outstanding
Shares used in calculating basic and diluted net loss per share						162,284				136,660

 

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Inktomi Corporation
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share data)

						December 31,				September 30,
						2002				2002
Assets
	Current assets
		Cash and cash equivalents				$	29,361			$	17,292
		Short-term investments					29,699				28,115
			Total cash, cash equivalents and short-term investments				59,060				45,407
		Accounts receivable, net					3,301				10,864
		Prepaid expenses and other current assets					3,715				5,533
			Total current assets				66,076				61,804
		Investments in equity securities					551				331
		Property and equipment, net					15,642				62,536
		Goodwill and other intangibles, net					—				10,028
		Other assets					3,643				4,708
		Loans to related parties					5,895				5,809
			Total assets			$	91,807			$	145,216
Liabilities and Stockholders’ Equity
	Current liabilities
		Accounts payable				$	2,423			$	10,021
		Accrued liabilities					29,025				30,180
		Deferred revenue					15,160				26,767
		Current portion of notes payable					2,373				30,003
		Current portion of capital lease obligations					1,014				1,210
			Total current liabilities				49,995				98,181
	Capital lease obligations, less current portion						—				216
	Other liabilities						10,927				185
			Total liabilities				60,922				98,582
	Stockholders’ equity
		Common Stock, $0.001 par value; 1,500,000 authorized at December 31, 2002 and September 30, 2002 respectively; 162,891 and 162,109 outstanding at December 31, 2002 and September 30, 2002, respectively					163				162
		Additional paid-in capital					951,814				952,602
		Deferred compensation					(460	)			(2,039	)
		Accumulated other comprehensive loss					(865	)			(1,276	)
		Accumulated deficit					(919,767	)			(902,815	)
				Total stockholders’ equity			30,885				46,634
				Total liabilities and stockholders’ equity		$	91,807			$	145,216