Verity Posts Another Profitable Quarter

Fresh off the acquisition of Inktomi's corporate search assets, the knowledge-management vendor posts its fourth straight profitable quarter.
Verity Inc. continues to defy the struggling economy. The knowledge-management and information-retrieval vendor reported strong second-quarter earnings Thursday, and with a year of uninterrupted profitability in the most precarious of environments under its belt, Verity is poised to expand its business by marketing the Ultraseek search technology it acquired from Inktomi Corp. last month for $25 million in cash.

For the quarter ended Nov. 30, Verity posted a profit of $2.4 million, or 7 cents a share, on revenue of $22.9 million, compared with a loss of $1.9 million, or 5 cents per share, on revenue of $22.6 million a year earlier. During a conference call, CEO Gary Sbona said he expects the Inktomi business to generate profits by the end of the current fiscal year, and Verity anticipates a full return of its acquisition costs within two years.

With its success in the past year, Verity has established itself with large companies that want to categorize and classify huge amounts of information; it added the likes of Bank of America, BMW, and Boeing as customers during the just-concluded quarter. But the vendor has had a tough time competing for smaller customers and departmental deployments. The Inktomi acquisition, expected to close this month, is designed to fill that gap. "What we found over the course of the last year was that there was a large segment of the market we weren't serving," president Anthony Bettencourt says.

Bettencourt acknowledges that some Inktomi customers are concerned as to whether the acquisition will lead to price increases or pressure to upgrade to Verity's more-expensive K2 suite. He says the company is making an effort to tread lightly with those customers, who have been happy with the Ultraseek technology. But Jupiter Research analyst Matthew Berk says the real concern could come from existing Verity customers, who have reason to worry that the company's focus will be watered down by its efforts to market Ultraseek.

Editor's Choice
Brian T. Horowitz, Contributing Reporter
Samuel Greengard, Contributing Reporter
Nathan Eddy, Freelance Writer
Brandon Taylor, Digital Editorial Program Manager
Jessica Davis, Senior Editor
Cynthia Harvey, Freelance Journalist, InformationWeek
Sara Peters, Editor-in-Chief, InformationWeek / Network Computing