Yahoo to Drop Inktomi Product

Shares of Inktomi Corp. tumbled 18% on Monday after Internet search service Yahoo Inc. said it will phase out some Inktomi products and use software from rival Google Inc.

Inktomi’s stock plunged $25.31 to close at $115.06 on Nasdaq after earlier hitting $113. Yahoo said Inktomi’s technology will be replaced for general search queries, though it will use Inktomi’s search features for its new corporate service, which bundles services such as e-mail, calendars and news into the intranet home page portals of businesses.

Google’s search service uses a technique called link analysis, which evaluates the relevance of Web pages based on the number and type of other Web pages with connections to the Internet site. Privately held Google has been recognized by Internet industry publications as one of the most accurate search directories for returning more relevant results than rivals that scour the Web hunting for keywords.

Inktomi Chief Executive David Peterschmidt “has been on the road for two weeks and hadn’t mentioned” the change, Wit SoundView analyst Kris Tuttle said. “People may be disappointed with the company’s” investor relations.

“Yahoo was representing about 2% of our aggregate revenue,” Inktomi Chief Operating Officer Richard Pierce said in an interview. “We’ve begun a relationship with [Yahoo] to penetrate the corporate space. We have the opportunity to not only make up the lost 2% but go beyond it.”

Pierce said the change in its Yahoo business won’t reduce earnings for the current quarter ending Friday. It’s expected to earn 2 cents a share, the average forecast of analysts surveyed by First Call/Thomson Financial.

Foster City-based Inktomi has reduced the emphasis on searching as a prime source of revenue in the last two years. Most sales now come from so-called caching software, which helps store information from the Internet on computers closer to users, letting consumers retrieve popular files more quickly.

Yahoo wasn’t immediately available for comment. Yahoo shares fell $6 to close at $119.31 on Nasdaq.