FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-67706
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 16, 2001)
12,500,000 SHARES
[INKTOMI LOGO]
INKTOMI CORPORATION
COMMON STOCK
-------------------------
Inktomi Corporation is selling all of the shares. The shares are quoted
on the Nasdaq National Market under the symbol "INKT." On October 30, 2001, the
last reported sale price of our common stock on the Nasdaq National Market was
$4.33 per share.
INVESTING IN THE COMMON STOCK INVOLVES RISKS THAT ARE DESCRIBED IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 3 OF THE ACCOMPANYING PROSPECTUS.
-------------------------
PER SHARE TOTAL
--------- -----
Public offering price................................... $4.25 $53,125,000
Underwriting discount................................... $.213 $2,662,500
Proceeds, before expenses, to Inktomi Corporation....... $4.037 $50,462,500
The underwriters may also purchase up to an additional 1,875,000 shares
from Inktomi at the public offering price, less the underwriting discount,
within 30 days from the date of this prospectus supplement to cover
overallotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The shares will be ready for delivery on or about November 5, 2001.
-------------------------
MERRILL LYNCH & CO. THOMAS WEISEL PARTNERS LLC
---------------------
The date of this prospectus supplement is October 30, 2001.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Forward Looking Statements.................................. i
Prospectus Supplement Summary............................... S-1
Use of Proceeds............................................. S-4
Capitalization.............................................. S-5
Dilution.................................................... S-6
Ratio of Earnings to Cover Fixed Charges.................... S-6
Price Range of Common Stock................................. S-7
Selected Consolidated Financial Data........................ S-8
Underwriting................................................ S-9
Legal Matters............................................... S-11
Incorporation by Reference.................................. S-11
PROSPECTUS
Summary..................................................... 1
Risk Factors................................................ 3
Use of Proceeds............................................. 11
Ratio of Earnings to Cover Fixed Charges and Preferred
Dividends................................................. 11
Description of Common Stock................................. 11
Description of Share Purchase Rights Plan................... 12
Description of Preferred Stock.............................. 13
Description of the Depository Shares........................ 13
Description of the Warrants................................. 16
Plan of Distribution........................................ 17
Legal Matters............................................... 18
Independent Accountants..................................... 18
Where You Can Find More Information......................... 18
----------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. Our business, financial condition, results of operations
and prospects may have changed since those dates.
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus, and the other
documents we incorporate by reference into this prospectus supplement and the
accompanying prospectus, include forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements may sometimes be
identified by words such as "anticipate," "believe," "expect," "intend," "may,"
"will" and similar expressions. Forward-looking statements include, but are not
limited to, those relating to the general direction of our business, including
our Network Products and Portal Services businesses; our ability to successfully
penetrate the enterprise market; our ability to introduce new products and
services and enhance existing products and services to meet customer needs,
particularly in the area of on-demand and
i
live streaming media; our expected expenses for future periods; our ability to
improve and restructure our sales and distribution capabilities; our focus on
both domestic and international markets; our ability to develop and maintain
productive relationships with providers of leading network technologies; the
possibility of acquiring complementary businesses, products, services and
technologies; and the conditions of markets that impact our business. Although
we believe our plans, intentions and expectations reflected in these
forward-looking statements are reasonable, we can give no assurance that these
plans, intentions or expectations will be achieved. Actual results, performance
or achievements could differ materially from those contemplated, expressed or
implied by the forward-looking statements contained in this prospectus
supplement and the accompanying prospectus. Important factors that could cause
actual results to differ materially from our forward-looking statements are set
forth below under the heading "Risk Factors," beginning on page 3 of the
accompanying prospectus, under the heading "Factors Affecting Operating Results"
in the section captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our Annual Report on Form 10-K and most
recent Quarterly Report on Form 10-Q, and in other reports filed with the
Securities and Exchange Commission. These factors are not intended to represent
a complete list of the general or specific factors that may affect us. Other
factors, including general economic factors and business strategies, may have a
significant effect on our business, financial condition, and results of
operations. You should not rely on these forward-looking statements, which
reflect our position as of the date of this prospectus supplement. We do not
assume any obligation to revise forward-looking statements.
ii
PROSPECTUS SUPPLEMENT SUMMARY
The following summary contains basic information about the offering. This
summary may not contain all of the information that is important to you. You
should carefully read this entire document and the other documents we refer to
for a more complete understanding of the offering. In addition, we incorporate
important business and financial information into this prospectus supplement by
reference. You may obtain the information incorporated by reference into this
prospectus supplement without charge by following the instructions in the "Where
You Can Find More Information" section of the accompanying prospectus. Unless
otherwise indicated, the information in this prospectus supplement assumes that
the underwriters' overallotment option has not been exercised.
INKTOMI CORPORATION
Inktomi Corporation is a leading provider of scalable network
infrastructure software. Inktomi develops, markets, licenses and supports a
range of network infrastructure applications that enhance the performance and
intelligence of large-scale networks, enabling enterprises and network service
providers to publish, distribute, manage and retrieve content quickly and
efficiently.
Historically, sales to the Internet service provider market have
comprised a substantial portion of our revenues. Since the introduction of our
first network products in 1998, Internet portals, Internet service providers,
content distribution networks and hosting providers have been an important and
consistent customer base. We expect to continue to support and sell new products
to this market and to pursue new service provider customers, particularly in the
Asia-Pacific region, and we expect that revenues from these markets will
continue to account for a significant percentage of our revenues.
In response to the changing market environment for service providers in
North America and Europe, we have recently refocused our business and sales
strategies to provide our network products and search solutions to the
enterprise market. Through acquisitions and internal development, we have
created a portfolio of network infrastructure software products to address the
content and information management and distribution requirements of large
enterprises. In July 2001, we introduced several new products designed to
further our enterprise software strategy and to provide enhanced solutions to
our service provider customers. These products include Inktomi Media Publisher,
Inktomi Traffic Core, Inktomi Traffic Edge, and Inktomi Traffic Controller.
Our products such as Inktomi Enterprise Search and Inktomi Media
Publisher can be purchased individually as low-cost, easily deployed solutions.
In addition, Inktomi products are available through our OEM partners, who offer
server-based appliances that embed our caching and streaming media products. For
organizations with more complex requirements, we offer comprehensive end-to-end
software solutions tailored to the requirements of the enterprise.
We have also reorganized our sales organizations and modified our sales
strategies in response to our changing business focus. We are actively marketing
our infrastructure software solutions to new enterprise accounts as well as to
our installed base of enterprise customers that have licensed Inktomi Enterprise
Search and Inktomi Media Publisher. We have focused our sales force on
establishing new relationships by offering our low-cost, high value applications
as an entry point into the enterprise and then leveraging those relationships to
offer our more comprehensive infrastructure applications and architecture.
Finally, we recently combined our separate product sales forces for content
networking and enterprise search into one, integrated sales force in which each
salesperson is responsible for marketing and selling our complete product line.
We believe that to market to a large number of enterprises, we will also
need to access the existing enterprise relationships of our OEM partners though
their substantial direct sales forces and distributor relationships. To date, we
have entered OEM distribution agreements with Dell Computer Corporation, Compaq
Computer Corporation, F5 Networks Corporation, Hewlett-Packard Company, and the
3Com Corporation. These distribution partners market and sell servers pre-loaded
with our network caching and streaming media technologies.
S-1
Compared with the service provider market, the enterprise market is in a
relatively early stage with respect to its implementation of network
infrastructure products such as those we offer. We cannot predict how the market
for our enterprise solutions will develop, and part of our strategic challenge
will be to convince enterprise customers of the cost benefits of our products.
Our future revenues and revenue growth rates will depend in large part on our
success in creating market acceptance of our enterprise solutions.
RECENT DEVELOPMENTS
On October 18, 2001, we reported financial results for the fourth fiscal
quarter and year ended September 30, 2001. Revenues for the quarter ended
September 30, 2001 totaled $39.0 million as compared to revenues of $79.3
million for the quarter ended September 30, 2000. Revenues for the year ended
September 30, 2001 totaled $198.6 million as compared to revenues of $224.2
million for the year ended September 30, 2000. In March 2001, we divested our
commerce division, which accounted for approximately $7.1 million of revenues
for the year ended September 30, 2001 and approximately $15.7 million of
revenues for the year ended September 30, 2000.
Net loss for the quarter ended September 30, 2001 was $45.0 million as
compared to a net loss of $15.1 million in the quarter ended September 30, 2000.
For the year ended September 30, 2001, we lost $296.5 million as compared to a
loss of $27.3 million for the year ended September 30, 2000.
Excluding results of operations from our divested commerce division,
non-cash employee compensation charges, amortization of goodwill and certain
one-time charges (including a charge for the write-down of intangible assets,
the write-down of certain investments in equity securities, and restructuring
costs), our net loss for the quarter ended September 30, 2001 would have been
$16.5 million as compared to net income of $6.5 million for the quarter ended
September 30, 2000. After excluding these items, our net loss for the year ended
September 30, 2001 would have been $61.7 million, and our net income for the
year ended September 30, 2000 would have been $8.5 million.
Our network products business, comprised of solutions for network
caching, content distribution and media broadcasting, contributed $21.0 million
in revenue for the quarter ended September 30, 2001. Our search solutions
business, which includes general web search and related services and enterprise
search, contributed $18.0 million in revenue.
We ended the quarter with $213.5 million in cash and short-term
investments, of which $129.0 million is classified as long-term restricted cash.
We used $16.2 million in cash and short-term investments in the quarter as
compared to $42.1 million in the quarter ended June 30, 2001, reflecting cost
control measures, working capital management, reduced headcount and the absence
of non-recurring payments made in prior quarters. We also completed a recently
announced restructuring and headcount reduction of approximately 18 percent of
our workforce.
----------------------
Based in Foster City, California, we were incorporated in California in
February 1996 and reincorporated in Delaware in February 1998. Our principal
offices are located at 4100 E. Third Avenue, Foster City, California 94404. Our
telephone number at this location is (650) 653-2800. Our World Wide Web site is
located at www.inktomi.com. Information contained on our web site does not
constitute part of this prospectus supplement or the accompanying prospectus. In
the prospectus and this prospectus supplement, "Inktomi," "our," "us," "we" and
similar expressions refer to Inktomi Corporation and its subsidiaries. Inktomi,
Traffic Server, Content Delivery Suite, Traffic Core, Traffic Edge, Traffic
Controller and the tri-colored cube logo are trademarks of Inktomi Corporation
in the United States and in other countries. All other trademarks or trade names
appearing herein are owned by their respective owners.
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement is a supplement to the prospectus that is also
part of this document. This prospectus supplement and the accompanying
prospectus are part of a registration statement that we filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may, over the two years following the date of the
accompanying prospectus, sell any combination of securities described in the
accompanying prospectus in one or more offerings, up to a total dollar amount of
$115,000,000, of which this offering is a part. The accompanying prospectus
provides you with a general description of the securities we may offer. This
prospectus supplement provides you with specific information about the common
stock we are selling in this offering. Both this prospectus supplement and the
accompanying prospectus include important information about us and other
information you should know before investing. This prospectus supplement also
adds to, updates and changes information contained in the accompanying
prospectus. You should read both this prospectus supplement and the accompanying
prospectus, together with the additional information described under
"Incorporation by Reference" on page S-11 of this prospectus supplement, before
investing in our shares of common stock.
THE OFFERING
Common stock offered by
Inktomi....................... 12,500,000 shares
Shares outstanding after the
offering...................... 141,609,838 shares
Use of proceeds............... We estimate that our net proceeds from this
offering without exercise of the overallotment
option will be approximately $50.0 million. We
intend to use these net proceeds for:
- general corporate purposes
- working capital
- A portion of the net proceeds from time to
time for the acquisition of businesses,
products and technologies
Risk factors.................. See "Risk Factors" and other information
included in the accompanying prospectus for a
discussion of factors you should carefully
consider before deciding to invest in shares of
the common stock.
Nasdaq National Market
symbol........................ INKT
The number of shares outstanding after the offering excludes 32,071,535
shares reserved for issuance under our stock option and stock purchase plans, of
which options to purchase 26,965,942 shares at a weighted average option price
of $6.06 have been issued. This number assumes that the underwriters'
overallotment option is not exercised. If the overallotment option is exercised
in full, we will issue and sell an additional 1,875,000 shares.
S-3
USE OF PROCEEDS
The net proceeds from our sale of 12,500,000 shares of common stock in
the offering are estimated to be $50,012,500, and $57,581,875 if the
underwriters' overallotment option is exercised in full, based on the public
offering price of $4.25 per share, after deducting the underwriting discount and
estimated offering expenses payable by Inktomi.
We currently intend to use the net proceeds we receive from the offering
for general corporate purposes and to meet working capital needs. We expect from
time to time to evaluate the acquisition of businesses, products and
technologies for which a portion of the net proceeds may be used. Pending such
uses, we will invest the net proceeds in interest-bearing securities.
S-4
CAPITALIZATION
The following table sets forth our unaudited capitalization as of
September 30, 2001 on an actual basis and an adjusted basis. The as adjusted
column gives effect to our receipt of the net proceeds from the sale of
12,500,000 shares of common stock we are offering at the public offering price
of $4.25 per share, after deducting the underwriting discount and estimated
offering expenses. The outstanding share information in the table below
excludes:
- 32,071,535 shares of common stock reserved for issuance under our stock
option and stock purchase plans, of which 26,965,942 shares are subject
to outstanding options; and
- 1,672,498 shares of common stock issuable upon exercise of outstanding
warrants.
SEPTEMBER 30, 2001
------------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
Cash and cash equivalents and short term investments........ $ 84,513 $ 134,526
Long term restricted cash................................... 128,957 128,957
--------- ---------
Total cash and cash equivalents, short-term investments
and long term restricted cash......................... 213,470 263,483
========= =========
Debt and capital lease obligations, less current portion.... $ 5,649 $ 5,649
Stockholders' equity:
Preferred Stock: $0.001 par value; authorized shares:
10,000,000; issued, outstanding and as adjusted shares:
none...................................................... -- --
Common stock: $0.001 par value; authorized shares:
1,500,000,000; issued and outstanding shares: 129,109,838,
actual; 141,609,838, as adjusted.......................... 129 142
Additional paid-in capital.................................. 897,241 947,242
Deferred compensation and other............................. (20,824) (20,824)
Accumulated other comprehensive loss........................ (2,545) (2,545)
Accumulated deficit......................................... (402,020) (402,020)
--------- ---------
Total stockholders' equity................................ 471,981 521,995
--------- ---------
Total capitalization................................... $ 477,630 $ 527,644
========= =========
S-5
DILUTION
If you invest in our common stock, your interest will be diluted by an
amount equal to the difference between the public offering price and the net
tangible book value per common share after this offering. We calculate net
tangible book value per common share by dividing the net tangible book value
(total assets less intangible assets and total liabilities) by the number of
outstanding common shares.
Our net tangible book value as of September 30, 2001 was $218 million or
approximately $1.69 per share. After the sale of the 12,500,000 shares of common
stock offered by Inktomi at the public offering price of $4.25 per share and
after deducting the underwriting discount and estimated offering expenses
payable by us, our net tangible book value at September 30, 2001 would have been
$268 million or approximately $1.89 per share. This represents an immediate
increase in net tangible book value of $0.20 per share to existing shareholders
and an immediate dilution of $2.36 per share to new investors in this offering.
The following table illustrates this dilution on a per share basis:
Initial price to public per share........................... $ 4.25
------
Net tangible book value per share as of September 30,
2001................................................... $ 1.69
------
Increase per share attributable to new investors.......... 0.20
======
Net tangible book value per share after the offering...... 1.89
------
Dilution per share to new investors......................... $ 2.36
======
The outstanding share information in the table above excludes:
- 32,071,535 shares of common stock reserved for issuance under our stock
option and stock purchase plans, of which 26,965,942 shares are subject
to outstanding options; and
- 1,672,498 shares of common stock issuable upon exercise of outstanding
warrants.
RATIO OF EARNINGS TO COVER FIXED CHARGES
As we have incurred losses in each of the periods presented below, we had
insufficient earnings to cover fixed charges by the following amounts:
FISCAL YEAR ENDED SEPTEMBER 30, NINE MONTHS ENDED
---------------------------------------------- JUNE 30,
1996 1997 1998 1999 2000 2001
------ ------- ------- ------- ------- -----------------
(IN THOUSANDS)
$3,431 $12,229 $29,915 $33,028 $23,814 $250,663
Please refer to Exhibit 12.1 filed with the accompanying prospectus for
additional information regarding the ratio of earnings to cover fixed charges.
S-6
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the Nasdaq National Market and trades under
the symbol "INKT." The following table sets forth for the periods indicated the
high and low composite per share closing sales prices as reported by the Nasdaq
National Market. All stock prices have been restated to reflect a 2-for-1 stock
split effected in the form of a 100% stock dividend to stockholders of record on
December 14, 1999.
HIGH LOW
------- -----
FISCAL YEAR ENDED SEPTEMBER 30, 2002
First quarter (through October 30, 2001).................. $ 6.04 2.70
FISCAL YEAR ENDED SEPTEMBER 30, 2001
Fourth quarter............................................ $ 9.17 2.25
Third quarter............................................. 10.96 2.79
Second quarter............................................ 18.63 5.74
First quarter............................................. 108.94 17.88
FISCAL YEAR ENDED SEPTEMBER 30, 2000
Fourth quarter............................................ $139.00 98.31
Third quarter............................................. 180.88 92.00
Second quarter............................................ 231.63 80.50
First quarter............................................. 100.19 47.81
On October 30, 2001, the last reported sale price of our common stock as
reported on the Nasdaq National Market was $4.33 per share. As of October 29,
2001, there were approximately 1,312 holders of record of our common stock.
S-7
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of Inktomi
Corporation and the notes thereto in our most recent Annual Report on Form 10-K
and Quarterly Report on Form 10-Q, and in other reports filed with the
Securities and Exchange Commission and incorporated herein by reference. The
historical results are not necessarily indicative of results to be expected for
any future period.
NINE MONTHS
ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30,
-------------------- ---------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
--------- -------- -------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Total revenues.................................. 159,549 144,896 224,217 73,503 21,335 5,853 530
Cost of revenues and operating expenses
Cost of revenues, sales and marketing,
research and development, and general and
administrative.............................. 231,373 163,953 244,056 110,012 50,745 18,082 3,961
Acquisition-related costs..................... 19,497 3,999 3,999 1,110 1,018 -- --
Purchased in-process research and
development................................. 430 -- 4,400 -- -- -- --
Amortization of intangibles and other
assets...................................... 53,869 -- 13,182 -- -- -- --
Impairment of intangibles and other assets.... 42,315 -- -- -- -- -- --
Restructuring................................. 5,249 -- -- -- -- -- --
--------- -------- -------- -------- -------- -------- -------
Total cost of revenues and operating
expenses.................................. 352,733 167,952 265,637 111,122 51,763 18,082 3,961
--------- -------- -------- -------- -------- -------- -------
Operating loss.................................. (193,184) (23,056) (41,420) (37,619) (30,428) (12,229) (3,431)
Impairment of Investments..................... (65,895) -- -- -- -- -- --
Other income, net............................... 8,416 10,824 15,906 4,591 513 (180) (104)
--------- -------- -------- -------- -------- -------- -------
Pretax loss..................................... (250,663) (12,232) (25,514) (33,028) (29,915) (12,409) (3,535)
Income tax provision............................ (793) -- (1,826) -- -- -- --
--------- -------- -------- -------- -------- -------- -------
Net loss.................................... $(251,456) $(12,232) $(27,340) $(33,028) $(29,915) $(12,409) $(3,535)
========= ======== ======== ======== ======== ======== =======
Earnings per share.............................. $ (2.00) $ (0.11) $ (0.24) $ (0.32) $ (0.38) $ (0.45) $ (0.94)
========= ======== ======== ======== ======== ======== =======
Shares used in calculating basic & diluted net
loss per share.............................. 125,590 111,830 113,030 102,033 79,252 27,609 3,768
========= ======== ======== ======== ======== ======== =======
JUNE 30, SEPTEMBER 30,
------------------- ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- -------- -------- ------- ------ -------
(IN THOUSANDS)
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents and short-term
investments....................................... $100,717 $300,066 $218,511 $304,214 $54,711 $7,921 $ 416
Long term restricted cash........................... 128,957 -- 119,616 -- -- -- --
Investments in equity securities.................... 6,147 174,410 117,898 8,180 -- -- --
Working capital..................................... 27,869 260,852 165,328 298,764 40,949 3,428 (3,599)
Total assets........................................ 625,564 610,312 919,256 385,337 78,946 16,606 2,521
Debt and capital lease obligations, less current
portion........................................... 1,899 6,603 3,748 8,293 9,074 5,094 --
Total stockholders' equity.......................... 515,109 511,055 803,062 343,867 50,184 5,700 (1,659)
-------------------------
In September 1998, we acquired C2B Technologies, Inc. In April 1999, we
acquired Impulse! Buy Network, Inc. In October 1999, we acquired WebSpective
Software, Inc. In October 2000, we acquired FastForward Networks, Inc. Each of
these transactions was accounted for as a pooling of interests. The selected
consolidated financial data set forth above gives retroactive effect to all of
these acquisitions.
S-8
UNDERWRITING
We intend to offer the shares through the underwriters named below.
Subject to the terms and conditions described in a purchase agreement among us
and the underwriters, we have agreed to sell to the underwriters, and the
underwriters severally have agreed to purchase from us, the number of shares
listed opposite their names below.
NUMBER
UNDERWRITER OF SHARES
----------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 8,125,000
Thomas Weisel Partners LLC.................................. 4,375,000
----------
Total........................................... 12,500,000
==========
The underwriters have agreed to purchase all of the shares sold under the
purchase agreement if any of these shares are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the underwriters may be required to make in respect of
those liabilities.
The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares, and other conditions
contained in the purchase agreement, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
COMMISSIONS AND DISCOUNTS
The underwriters have advised us that they propose initially to offer the
shares to the public at the initial public offering price on the cover page of
this prospectus and to dealers at that price less a concession not in excess of
$.11 per share. After the initial public offering, the public offering price and
concession may be changed.
The following table shows the public offering price, underwriting
discount and proceeds before expenses to Inktomi. The information assumes either
no exercise or full exercise by the underwriters of their overallotment option.
PER SHARE WITHOUT OPTION WITH OPTION
--------- -------------- -----------
Public offering price...................... $4.25 $53,125,000 $61,093,750
Underwriting discount...................... $.213 $2,662,500 $3,061,875
Proceeds, before expenses, to Inktomi...... $4.037 $50,462,500 $58,031,875
The expenses of the offering, not including the underwriting discount,
are estimated at $450,000 and are payable by Inktomi.
OVERALLOTMENT OPTION
We have granted an option to the underwriters to purchase up to 1,875,000
additional shares at the public offering price less the underwriting discount.
The underwriters may exercise this option for 30 days from the date of this
prospectus solely to cover any overallotments. If the underwriters exercise this
option, each will be obligated, subject to conditions contained in the purchase
agreement, to purchase
S-9
a number of additional shares proportionate to that underwriter's initial amount
reflected in the above table.
NO SALE OF SIMILAR SECURITIES
We and our executive officers and directors have agreed, with exceptions,
not to sell or transfer any common stock for 90 days after the date of this
prospectus without first obtaining the written consent of Merrill Lynch.
Specifically, we and these other individuals have agreed not to directly or
indirectly
- offer, pledge, sell or contract to sell any common stock,
- sell any option or contract to purchase any common stock,
- purchase any option or contract to sell any common stock,
- grant any option, right or warrant for the sale of any common stock,
- lend or otherwise dispose of or transfer any common stock,
- request or demand that we file a registration statement related to the
common stock, or
- enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock whether
any such swap or transaction is to be settled by delivery of shares or
other securities, in cash or otherwise.
This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the person
executing the agreement or for which the person executing the agreement later
acquires the power of disposition.
QUOTATION ON THE NASDAQ NATIONAL MARKET
The shares are quoted on the Nasdaq National Market under the symbol
"INKT."
PRICE STABILIZATION, SHORT POSITIONS
Until the distribution of the shares is completed, Securities and
Exchange Commission rules may limit underwriters and selling group members from
bidding for and purchasing our common stock. However, the underwriters may
engage in transactions that stabilize the price of the common stock, such as
bids or purchases to peg, fix or maintain that price.
If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the underwriters may reduce that short position by
purchasing shares in the open market. The underwriters may also elect to reduce
any short position by exercising all or part of the overallotment option
described above. Purchases of the common stock to stabilize its price or to
reduce a short position may cause the price of the common stock to be higher
than it might be in the absence of such purchases.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the underwriters
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
PASSIVE MARKET MAKING
In connection with this offering, underwriters and selling group members
may engage in passive market making transactions in the common stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934 during a period before the commencement of
offers or sales of common stock and extending through the completion of
distribution.
S-10
A passive market maker must display its bid at a price not in excess of the
highest independent bid of that security. However, if all independent bids are
lowered below the passive market maker's bid, that bid must then be lowered when
specified purchase limits are exceeded.
OTHER RELATIONSHIPS
The underwriters and their affiliates have engaged in, and may in the
future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions.
Thomas Weisel Partners LLC, one of the underwriters, was organized and
registered as a broker-dealer in December 1998. Since December 1998, Thomas
Weisel Partners has been named as a lead or co-manager on 161 completed
transactions, and has acted as a syndicate member in an additional 146 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with us
pursuant to the purchase agreement entered into in connection with this
offering.
LEGAL MATTERS
The validity of the issuance of the securities offered by this prospectus
supplement and the accompanying prospectus will be passed upon for Inktomi by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain legal matters in connection with the offering will be passed
upon for the underwriters by Sidley Austin Brown & Wood, LLP, New York, New
York.
INCORPORATION BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them. This means that we can disclose
important information to you by referring you to another document filed
separately with the Commission. The information incorporated by reference is
considered to be part of this prospectus supplement and the accompanying
prospectus, and information that we file later with the Commission will
automatically update and supersede this information.
We incorporate by reference in this prospectus supplement the documents
we indicate under "Where You Can Find More Information" on page 18 of the
accompanying prospectus. We will provide to each person who so requests,
including any beneficial owner to whom this prospectus supplement and the
accompanying prospectus are delivered, a copy of these documents from us, at no
cost, by contacting us at the address or telephone number provided in "Where You
Can Find More Information" on page 18 of the accompanying prospectus.
You should rely only on the information incorporated by reference or
provided in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume the information in this prospectus supplement
or the accompanying prospectus is accurate as of any date other than the date on
the front of those documents.
S-11
PROSPECTUS
$115,000,000
[INKTOMI LOGO]
INKTOMI CORPORATION
BY THIS PROSPECTUS, WE MAY OFFER --
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
WARRANTS
THESE SECURITIES INVOLVE SUBSTANTIAL RISKS. SEE "RISK FACTORS" ON PAGE 3
FOR INFORMATION YOU SHOULD CONSIDER BEFORE BUYING THE SECURITIES.
Our common stock is listed on the Nasdaq National Market under the symbol
"INKT." On August 15, 2001, the last reported sale price of our common stock on
the Nasdaq National Market was $5.10 per share.
----------------------
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you invest.
----------------------
This prospectus may not be used to offer and sell securities unless
accompanied by a prospectus supplement.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus is dated August 16, 2001
TABLE OF CONTENTS
PAGE
----
Summary..................................................... 1
Risk Factors................................................ 3
Use of Proceeds............................................. 11
Ratio Of Earnings to Cover Fixed Charges and Preferred
Dividends................................................. 11
Description of Common Stock................................. 11
Description of Share Purchase Rights Plan................... 12
Description of Preferred Stock.............................. 13
Description of the Depositary Shares........................ 13
Description of the Warrants................................. 16
Plan of Distribution........................................ 17
Legal Matters............................................... 18
Independent Accountants..................................... 18
Where You Can Find More Information......................... 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, and the other documents we incorporate by reference into
this prospectus, include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These forward-looking statements may sometimes be
identified by words such as "anticipate," "believe," "expect," "intend," "may,"
"will" and similar expressions. Forward-looking statements include, but are not
limited to, those relating to the general direction of our business, including
our Network Products and Portal Services businesses; our ability to successfully
enter new markets; our ability to introduce new products and services and
enhance existing products and services to meet customer needs, particularly in
the area of on-demand and live streaming media; our expected expenses for future
periods; our ability to improve our sales and distribution capabilities; our
focus on both domestic and international markets; our ability to develop and
maintain productive relationships with providers of leading network
technologies; the possibility of acquiring complementary businesses, products,
services and technologies; and the conditions of markets that impact our
business. Although we believe our plans, intentions and expectations reflected
in these forward-looking statements are reasonable, we can give no assurance
that these plans, intentions or expectations will be achieved. Actual results,
performance or achievements could differ materially from those contemplated,
expressed or implied by the forward-looking statements contained in this
prospectus. Important factors that could cause actual results to differ
materially from our forward-looking statements are set forth below under the
heading "Risk Factors," beginning on page 3 of this prospectus, under the
heading "Factors Affecting Operating Results" in the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our most recent Annual Report on Form 10-K and Quarterly Report
on Form 10-Q, and in other reports filed with the Securities and Exchange
Commission. These factors are not intended to represent a complete list of the
general or specific factors that may affect us. Other factors, including general
economic factors and business strategies, may have a significant effect on our
business, financial condition, and results of operations. You should not rely on
these forward-looking statements, which reflect our position as of the date of
this prospectus. We do not assume any obligation to revise forward-looking
statements.
i
SUMMARY
This prospectus is part of a registration statement that we filed with
the Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf process, we may, over the next two years, sell any combination
of securities described in this prospectus in one or more offerings, up to a
total dollar amount of $115,000,000. This prospectus provides you with a general
description of the securities we may offer. Each time we sell securities, we
will provide a prospectus supplement that will contain specific information
about the terms of that offering. The prospectus supplement may also add, update
or change information contained in this prospectus. You should read both this
prospectus and any prospectus supplement together with additional information
described below under the heading "Where You Can Find More Information."
INKTOMI CORPORATION
Inktomi Corporation is a leading provider of scalable network
infrastructure software. We develop, market, license and support a range of
network infrastructure applications that enhance the performance and
intelligence of large-scale networks for enterprises and network service
providers by enabling them to publish, distribute, manage and retrieve content
across wide area and local area networks. Our network infrastructure
applications are divided into two broad categories: Network Products, comprised
of industry leading solutions for network caching, content distribution, media
broadcasting and media publishing; and Search Solutions, which include general
Web search and related services, and enterprise search.
Based in Foster City, California, we were incorporated in California in
February 1996 and reincorporated in Delaware in February 1998. Our principal
offices are located at 4100 E. Third Avenue, Foster City, California 94404. Our
telephone number at this location is (650) 653-2800. Our World Wide Web site is
located at www.inktomi.com. Information contained on our web site does not
constitute part of this prospectus. In this report, "Inktomi," "our," "us," "we"
and similar expressions refer to Inktomi Corporation and its subsidiaries.
Inktomi, Traffic Server, Content Delivery Suite, Traffic Core, Traffic Edge,
Traffic Controller and the tri-colored cube logo are trademarks of Inktomi
Corporation in the United States and in other countries. All other trademarks or
trade names appearing herein are owned by their respective owners.
THE SECURITIES WE MAY OFFER
We may offer up to $115,000,000 of securities under this prospectus.
These securities may consist of our common stock, preferred stock, depositary
shares or warrants to purchase our common or preferred stock. A prospectus
supplement, which we will provide to you each time we offer securities, will
describe the specific amounts, prices and terms of these securities.
We may sell the securities to or through underwriters, dealers or agents
or directly to purchasers. We, as well as any agents acting on our behalf,
reserve the sole right to accept and to reject in whole or in part any proposed
purchase of securities. Each prospectus supplement will set forth the names of
any underwriters, dealers or agents involved in the sale of the securities
described in that prospectus supplement and any applicable fee, commission or
discount arrangements with them.
COMMON STOCK
We may offer our common stock, par value $0.001 per share. Each holder of
common stock is entitled to one vote per share. The holders of our common stock
have no preemptive rights or cumulative voting rights. Common stockholders are
entitled to receive dividends declared by our board of directors out of funds
legally available for the payment of dividends, subject to rights, if any, of
preferred stockholders. We have never paid a cash dividend and do not anticipate
paying any cash dividends for the foreseeable future.
1
PREFERRED STOCK AND DEPOSITARY SHARES
We may issue preferred stock in one or more series and will determine any
dividend, voting, and conversion rights and other provisions at the time of
sale. We may also issue fractional shares of preferred stock that will be
represented by depositary shares and depositary receipts.
WARRANTS
We may issue warrants for the purchase of preferred stock or common
stock. We may issue warrants independently or together with other securities.
2
RISK FACTORS
Before you invest in any of our securities, you should be aware of
various risks, including those described below. You should carefully consider
these risk factors, together with all of the other information included or
incorporated by reference in this prospectus and in the prospectus supplement,
before you decide whether to purchase any of our securities. The risks set out
below are not the only risks we face. Interested persons should carefully
consider the risks described below in evaluating our company and its business,
financial condition, and results of operations. Additional risks and
uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impair our business and financial situation.
If any of the following risks occur, our business, financial condition
and results of operations could be materially adversely affected. In such case,
the trading price of our securities could decline, and you may lose all or part
of your investment.
OUR FUTURE GROWTH DEPENDS ON THE COMMERCIAL SUCCESS OF EACH OF OUR NETWORK
PRODUCTS AND OUR ABILITY TO LEVERAGE THESE TECHNOLOGIES TO DEVELOP AND INTRODUCE
NEW PRODUCTS FOR EMERGING MARKETS.
Our future growth substantially depends on the commercial success of our
Traffic Server network cache product, our Content Delivery Suite, our Media
Products, and our recently introduced content networking applications. The
markets for these products are in their early stages and we cannot be sure that
our target customers will widely adopt and deploy these technologies throughout
their networks. Demand for our products has fluctuated significantly over the
past several quarters as our core telecommunications and network service
provider customers and prospects have deferred and downsized purchases and as
the Content Delivery Network market has declined. We expect this business
environment to continue for the foreseeable future, and expect we will need to
continue to modify and enhance our products for multiple market segments
including in particular the enterprise market. In this connection, we recently
introduced a suite of content networking applications which includes Traffic
Core, Traffic Edge, Traffic Controller and Inktomi Media Publisher. We are
targeting these new products primarily towards network service providers and
large enterprise customers and we expect revenues from these products to be
modest over the next several quarters. We cannot be sure we will be successful
in our development efforts or that our products will gain market traction. Our
future success substantially depends on our ability to generate substantial and
sustained revenues from our existing Network Products and new content networking
products in each of our market segments and substantially increase the number of
new and repeat customer transactions.
DEMAND FOR OUR STREAMING MEDIA PRODUCTS IS DEPENDENT ON INCREASING AVAILABILITY
OF MEDIA CONTENT ON NETWORKS, THE BUILD OUT OF BROADBAND CAPABILITIES AND THE
ESTABLISHMENT OF PROFITABLE BUSINESS MODELS BY OUR CUSTOMERS, AMONG OTHER
FACTORS, ALL WHICH ARE OUTSIDE OF OUR CONTROL.
The streaming media market is in its early stages and sales of our Media
products to date have been modest and fluctuated from quarter to quarter. The
amount of appealing streaming content currently available is relatively limited.
The amount of streaming content available over public networks and enterprise
networks must increase substantially for our potential customers to justify
their purchase of our Media Products. Our Media Products are complex which may
limit their market acceptance and deployment. Growth in sales of our Media
Products in the service provider space depends on the increased availability and
usage of broadband access to the Internet. We cannot be sure that broadband
access to the Internet will grow fast enough or be utilized by enough persons to
create a sustainable marketplace for our Media Products. In addition, successful
business models for the delivery of streaming media content must be developed in
order for there to be sufficient demand for our Media Products in the service
provider marketplace. As we focus on the enterprise content networking market,
enterprises building out their content networks must realize the value of live
and on-demand webcasts, training seminars and other media applications in order
for our Media Products to be widely adopted. There can be no assurances that
enterprises will adopt streaming or on-demand media solutions for the operation
of their business or networks, or that our solutions will meet their
requirements. Our Media products rely in part on continued
3
access to third party technology that enables them to effectively recognize and
stream media. Failure to maintain our current arrangements to use these third
party technologies could adversely affect the appeal of our Media Products.
OUR BUSINESS WOULD BE HARMED IF CUSTOMERS CHOOSE NOT TO USE OR PROMOTE OUR WEB
SEARCH SERVICES.
Revenues from our Web search services result primarily from the number of
end-user searches processed by our Search Engine. Our agreements with customers
do not require them to direct end-users to our search services or to use our
search services exclusively or at all. Accordingly, revenues from search
services are highly dependent upon the willingness of customers to promote and
use the search services we provide, the ability of our customers to attract
end-users to their online services, the volume of end-user searches that are
processed by our Search Engine, and the ability of customers to monetize traffic
from their Web site search pages. Some of our customers have selected competing
search and directory services to operate in combination with our services, which
has reduced the number of queries available for us to serve and may erode future
revenue growth opportunities. The technological barriers for customers to
implement additional services or to replace our services are not substantial.
The market for Internet search is maturing and many smaller and medium size
portals are not profitable, suffer from declining revenue growth and have
limited access to capital to fund operational needs. Many of our smaller search
services customers have elected not to renew their contracts and our market
opportunity from portals has become more limited. As a result, our Web search
revenues are dependent on a relatively few number of major customers. In order
for us to increase revenues from our Search Engine business, we will need to
attract new customers, develop and deliver new search services, products and
features to existing and future customers, establish deeper strategic
relationships with our customers, and increase the adoption of our Index Connect
and Search Submit services for content publishers.
WE MAY BE UNABLE TO GROW SALES OF OUR ENTERPRISE SEARCH PRODUCTS.
The growth of our Portal Services revenue is dependent upon the growth of
sales of our search software products to enterprises. Such revenues are derived
from software license fees and fees derived from support and upgrades of such
software. A number of factors could cause sales of our enterprise search
products to slow or decline. We face intense competition from companies with
more experience in the marketplace and who offer a broad set of products and
services to our target customers. In addition, these companies have deeper
strategic relationships and have established well developed channels to sell and
distribute their products and services. We historically have sold our enterprise
search products primarily at the departmental level within large enterprises,
through a direct sales force. To expand our market opportunities, we will need
to enhance our product and service offerings, effectively market our products as
enterprise wide search and navigation solutions, and develop channel and
licensing programs to extend our reach.
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE AND RAPIDLY CHANGING AND
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST NEW ENTRANTS AND ESTABLISHED
COMPANIES WITH GREATER RESOURCES.
We compete in markets that are new, intensely competitive, highly
fragmented and rapidly changing. We have experienced and expect to continue to
experience increased competition from current and potential competitors in each
of our market segments, many of which are bringing new solutions to market,
establishing technology alliances and OEM relationships with larger companies,
and focusing on specific segments of our target markets. In some cases, our
competitors are implementing aggressive pricing and other strategies that are
focused in the short term on building customer bases, name recognition in the
market and capturing market share. This may cause some price pressure on our
products and services in the future.
We directly compete against multiple companies with our Network Products,
including Akamai, CacheFlow, Cisco Systems, InfoLibria, Microsoft, Netscape,
Network Appliance, Novell, RealNetworks and Volera. We are aware of numerous
other major software developers as well as smaller entrepreneurial companies
that are focusing significant resources on developing and marketing products and
services that
4
will compete with our Network Products. We also believe that we may face
competition from other providers of competing solutions to network
infrastructure problems, including networking hardware and software
manufacturers, traditional hardware manufacturers, telecommunications providers,
cable TV/ communications providers, software database companies, and large
diversified software and technology companies. Many of these companies provide
or have announced their intentions to provide a range of software and hardware
products based on Internet protocols and to compete in the broad
Internet/intranet software market as well as in specific market segments in
which we compete.
We compete with a number of companies to provide Internet search and
directory services and technology. In the Web services marketplace, our primary
competitors include a variety of established and newer companies, including
AltaVista, Ask Jeeves, FAST Search and Transfer, Google, Goto.com, LookSmart,
Netscape Open Directory, Northern Light, and Yahoo. These companies and other
competitors have focused on search result relevance, database size metrics and
ease of use to differentiate their services. In the search software market, our
primary competitors include AltaVista, Autonomy, Dataware, Excalibur, Fulcrum,
Lotus, Microsoft and Verity. We also indirectly compete in this market with
Oracle and other database vendors that offer information search and retrieval
capabilities with their core database products, and Web platform companies such
as Netscape. In addition, several large media and other Internet-based companies
have made investments in, or acquired, Internet search engine companies and may
seek to develop or customize their products and services to deliver to our
target customers.
Our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements than we can. In addition, our
current and potential competitors may bundle their products with other software
or hardware, including operating systems, browsers and network hardware in a
manner that may discourage users from purchasing products offered by us. Also,
current and potential competitors have or may have greater name recognition,
more extensive customer bases and access to proprietary content. Increased
competition could result in price reductions, fewer customer orders, fewer
search queries served, reduced gross margins and loss of market share.
THE NETWORK INFRASTRUCTURE MARKET IS RAPIDLY CHANGING AND WE MUST DEVELOP,
ACQUIRE, AND INTRODUCE NEW PRODUCTS AND TECHNOLOGIES TO GROW OUR REVENUES AND
REMAIN COMPETITIVE.
The network infrastructure market is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards could render our
existing products obsolete. Our future success and revenue growth will depend
upon our ability to develop, acquire and introduce a variety of new products and
product enhancements to address the increasingly sophisticated needs of our
customers, particularly in the content networking, wireless, and enterprise
markets. We have experienced delays in releasing new products and product
enhancements and may experience similar delays in the future. Material delays in
introducing new products and enhancements may cause customers to forego
purchases of our products or to purchase those of our competitors.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE
FLUCTUATIONS MAY CAUSE OUR STOCK PRICE TO FALL.
We expect that a significant portion of our future revenues will come
from our Network Products. We further expect that these revenues will come from
licenses to a relatively small number of customers. The volume and timing of
orders are difficult to predict because the markets for our Network Products are
in their early stages and the sales cycle varies substantially from customer to
customer. In addition, many customers in our target markets are scrutinizing
their capital spending budgets in light of the slowing economy, and other
customers have limited access to capital to fund operational needs. These
companies are shifting their buying patterns as a result, taking a more cautious
and measured approach to their network build-out plans. Historically, customer
orders during a quarter have consisted of a small number of multi-million dollar
deals and several other smaller orders ranging from $0.1 million to $0.5
million. The cancellation, deferral or reduction of even a small number of
licenses of any of our Network Products
5
would reduce our expected revenues, which would adversely affect our quarterly
financial performance. To the extent significant sales occur earlier than
expected, operating results for later quarters may not compare favorably with
operating results from earlier quarters.
Our operating expenses are largely based on anticipated revenue trends
and a high percentage of our expenses are fixed in the short term. Despite our
recent workforce reduction, we expect to continue to make significant
investments to develop and market products for the enterprise, wireless and
content networking markets, broaden our customer support capabilities, develop
new distribution channels, and fund greater levels of research and development.
A delay in generating or recognizing revenue for the reasons already discussed
or for any other reason could cause significant variations in our operating
results from quarter-to-quarter and could result in substantial operating
losses.
Due to these factors, we believe that quarter-to-quarter comparisons of
our operating results are not a good indication of our future performance. It is
likely that in some future quarter, our operating results may be below the
expectations of public market analysts or investors, and the price of our Common
Stock may fall.
OUR FUTURE REVENUE GROWTH DEPENDS ON OUR ABILITY TO IMPROVE THE EFFECTIVENESS
AND BREADTH OF OUR SALES, DISTRIBUTION AND SUPPORT ORGANIZATIONS.
We will need to improve the effectiveness and breadth of our direct and
indirect sales operations, both domestically and internationally, in order to
increase market awareness and sales of our products. Our products and services
require sophisticated sales efforts targeted at several people within our
prospective customers' organizations. Competition for qualified sales personnel
is intense, and we might not be able to hire the kind and number of sales
personnel we are targeting. In addition, we will need to effectively train and
educate our sales force if we are to be successful in selling into the
enterprise market.
Our future revenue growth is dependent upon establishing and maintaining
productive relationships with a variety of distribution partners, including
OEMs, resellers, systems integrators and joint marketing partners. We seek to
sign up distribution partners that have a substantial amount of technical and
marketing expertise. Even with this expertise, our distribution partners
generally require a significant amount of training and support from us, and we
anticipate that it will take the next few quarters before our distribution
partners will develop the expertise and skills necessary to effectively sell our
products. We may be adversely affected if our distribution partners fail to ship
products in a timely manner or according to agreed upon schedules. In recent
quarters we have focused our efforts on entering into OEM relationships with
prominent network hardware providers. Several risks arise in connection with
these relationships including conflicts with our other sales channels,
unpredictable product support obligations and reliance on such third parties for
sales results.
Similarly, the complexity of our products and the difficulty of
installing them require highly trained customer service and support personnel.
We currently have a relatively small customer service and support organization
and will need to continue to train our staff to support new customers, new
product lines, the expanding needs of existing customers and the
internationalization of our business. Competition for customer service and
support personnel is intense in our industry due to the limited number of people
available with the necessary technical skills and understanding of the relevant
industries including the Internet, telecommunications and commerce.
THE LOSS OF A KEY CUSTOMER COULD ADVERSELY AFFECT OUR REVENUES AND BE PERCEIVED
AS A LOSS OF MOMENTUM IN OUR BUSINESS.
We have generated a substantial portion of our historical revenues from a
limited number of customers. We expect that a small number of customers will
continue to account for a substantial portion of revenues for the foreseeable
future. As a result, if we lose a major customer for any reason, including
non-renewal of a customer contract or a failure to meet performance
requirements, or in the case of our Search Engine business if there is a decline
in usage of any customer's search service, our revenues would be adversely
affected. Our potential customers and public market analysts or investors may
perceive any
6
such loss as a loss of momentum in our business, which may adversely affect
future opportunities to sell our products and services and cause our stock price
to decline. We cannot be sure that customers that have accounted for significant
revenues in past periods, individually or as a group, will continue to generate
revenues in any future period.
IF WE ARE UNABLE TO MAINTAIN OUR RELATIONSHIPS WITH CUSTOMERS AND THE COMPANIES
THAT SUPPLY AND DISTRIBUTE OUR PRODUCTS, WE MAY HAVE DIFFICULTY SELLING OUR
PRODUCTS AND SERVICES.
We believe that our success in penetrating our target markets depends in
part on our ability to develop and maintain strategic relationships with key
hardware and software vendors, Internet technology and service providers,
distribution partners and customers. We believe these relationships are
important in order to validate our technology, facilitate broad market
acceptance of our products, enhance our product and service offering, and expand
our sales, marketing and distribution capabilities. If we are unable to develop
these key relationships or maintain and enhance existing relationships,
particularly in the areas of streaming audio and video, our Traffic Server
product and our new products for the content networking market, we may have
difficulty selling our products and services.
We have from time to time licensed components from others such as
reporting functions and security features and incorporated them into our
products and services. If these licensed components are not maintained, it could
impair the functionality of our products and services and require us to obtain
alternative products from other sources or to develop this software internally.
In either case, this could involve costs and delays as well as diversion of
engineering resources.
THE GLOBAL WIRELESS INTERNET SPACE IS A NEW MARKET, AND WE CANNOT BE CERTAIN
THAT OUR ENTRY INTO THIS MARKET WILL BE SUCCESSFUL.
We have been engaged in significant research and development for
developing technology for the wireless marketplace. Our current product is
focused on accelerating data delivery across wireless networks. The market for
new wireless products and services is in an early stage of development and is
rapidly evolving. The current market for wireless products and services is in
flux both nationally and internationally. Our target customers, the wireless
service providers, are deferring and delaying the introduction of new services
and products which is likely to slow revenue generation from our wireless
product. In addition, we have limited experience in the wireless market and
cannot be certain that the market will develop in such a manner as to provide us
with substantial revenue-generating opportunities. Several companies are
developing products and services targeted to the wireless space, many of which
are ahead of us in development and implementation. We expect competition to be
intense. To facilitate our entry into the wireless space, we will need to modify
our products and services, establish and manage strategic alliances with a
variety of companies including wireless operators, content providers, hardware
manufacturers and integrated service vendors, and hire new management, technical
sales and other personnel. We cannot be certain that our entry into the wireless
space will be successful.
THE LEGAL ENVIRONMENT IN WHICH WE OPERATE IS UNCERTAIN AND CLAIMS AGAINST US
COULD CAUSE OUR BUSINESS TO SUFFER.
Our products and services operate in part by making copies of material
available on the Internet and other networks and making this material available
to end-users from a central location or local systems. In addition, our Portal
Services technology systems collect end-user information, which we use to
deliver services to our customers and our customers use to deliver services to
their users. This creates the potential for claims to be made against us (either
directly or through contractual indemnification provisions with customers) for
defamation, negligence, copyright or trademark infringement, personal injury,
invasion of privacy or under other legal theories based on the nature, content,
copying, dissemination, collection or use of these materials. These claims have
been threatened against us from time to time and have been brought, and
sometimes successfully pressed, against online service providers. It is also
possible that if any information provided through any of our Portal Services or
facilitated by our Network Products contains errors, third parties could make
claims against us for losses incurred in reliance
7
on this information. Although we carry general liability insurance, our
insurance may not cover potential claims of this type or be adequate to protect
us from all liability that may be imposed.
INTERNET-RELATED LAWS COULD ADVERSELY AFFECT OUR BUSINESS.
Laws and regulations that apply to communications and commerce over the
Internet are becoming more prevalent. The United States Congress has enacted
Internet laws regarding children's privacy, copyrights, taxation and the
transmission of sexually explicit material. The European Union has enacted its
own privacy regulations as well as legislation governing e-commerce, copyrights
and caching. The law of the Internet, however, remains largely unsettled, even
in areas where there has been some legislative action. It may take years to
determine whether and how existing laws such as those governing intellectual
property, privacy, libel and taxation apply to the Internet. In addition, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business online. The
adoption, implementation or modification of laws and regulations relating to the
Internet, or interpretations of existing law, could adversely affect our
business.
WE HAVE CONTINUING OBLIGATIONS RELATED TO OUR RECENTLY DIVESTED COMMERCE
DIVISION THAT MAY ADVERSELY AFFECT OUR FUTURE FINANCIAL RESULTS.
In connection with the sale of our Commerce Division in March 2001, we
assigned certain contracts to the acquirer, e-centives, Inc. Should a claim
originate out of one these assigned contracts for a matter arising prior to the
assignment, we may be obligated to indemnify e-centives for such claim. Such
indemnification would involve expending management and financial resources to
resolve the claim. In addition, certain customer contracts related to the
Commerce Division were not assigned to e-centives. We are still obligated to
provide the products and services to the customers under these contracts. We
expect to expend financial and management resources to either fulfill or
eliminate the obligations under these contracts. We also may incur unforeseen
expenses as we continue to separate out and transition certain information
technology infrastructure, sales and support methods and contract management
functions.
ANY ACQUISITIONS WE MAKE COULD ADVERSELY AFFECT OUR OPERATIONS OR FINANCIAL
RESULTS.
We have purchased six companies since September 1998 and may invest in or
acquire complementary companies, products and technologies in the future. If we
buy a company, we could have difficulty in assimilating that company's personnel
and operations and maintaining acceptable standards, controls, procedures and
policies. In addition, the key personnel of the acquired company may decide not
to work for us. Also, we could have difficulty in integrating the acquired
technology or products into our operations. There could be potential unknown
liabilities associated with the purchased company. These difficulties could
disrupt our ongoing business, distract our management and employees and increase
our expenses. Furthermore, we may have to incur debt or issue equity securities
to pay for any future acquisitions, the issuance of which could be dilutive to
our stockholders.
WE MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED TO SUCCEED.
Our primary asset is the intellectual capabilities of our employees. We
are therefore dependent on recruiting and retaining a strong team of personnel
across all functional areas. Competition for these individuals is intense, and
we may not be able to attract or retain the highly qualified personnel necessary
for our success. Our employment relationships are generally at-will. We have had
key employees leave us in the past and we can make no assurance that one or more
will not leave us in the future. If any of our key employees were to leave us,
we could face substantial difficulty in hiring qualified successors and could
experience a loss in productivity while any such successor obtains the necessary
training and experience. Many of our key employees have reached or will soon
reach the four-year anniversary of their hiring date and will be fully vested in
their initial stock option grants. While our key employees are typically granted
additional stock options to provide additional incentive to remain with us, the
initial option grant is typically the largest and an employee may be more likely
to leave us upon completion of the vesting period
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for the initial option grant. In light of current market conditions, we may
undertake programs to retain our employees that may be viewed as dilutive to our
shareholders. We do not have key person life insurance policies covering any of
our employees other than our Chief Executive Officer.
OUR EFFORTS TO INCREASE OUR PRESENCE IN MARKETS OUTSIDE OF THE UNITED STATES MAY
BE UNSUCCESSFUL AND COULD RESULT IN LOSSES.
We market and sell our products in the United States and internationally,
principally Europe and Asia. Historically, the percentage of sales to customers
located outside of the United States has varied substantially, reflecting the
early stage build-out of our international operations. We have limited
experience in developing localized versions of our products and marketing and
distributing our products internationally. In addition, other inherent risks may
apply to international markets and operations, including:
- the impact of recessions in economies outside the United States;
- greater difficulty in accounts receivable collection and longer
collection periods;
- unexpected changes in regulatory requirements;
- difficulties and costs of staffing and managing foreign operations;
- potentially adverse tax consequences; and
- political and economic instability.
We also have limited experience operating in foreign countries and
managing multiple offices with facilities and personnel in disparate locations.
We may not be able to manage our resources effectively, coordinate our efforts,
supervise and train our personnel or otherwise successfully manage our
resources. The laws and cultural requirements in foreign countries can vary
significantly from those in the United States. The inability to integrate our
business in these jurisdictions and to address cultural differences may
adversely affect the success of our international operations.
INTELLECTUAL PROPERTY CLAIMS AGAINST US COULD CAUSE OUR BUSINESS TO SUFFER.
Substantial litigation regarding intellectual property rights exists in
the software industry. We expect that software products may be increasingly
vulnerable to third party infringement claims as the number of competitors in
our industry segments grows, the functionality of products in different industry
segments overlaps, and more business method patents are submitted to and issued
by patent authorities. We believe that many companies have filed or intend to
file patent applications covering aspects of their technology that they may
claim our technology infringes. Some of these companies have sent copies of
their patents to us for informational purposes. We cannot be sure that these
parties will not make a claim of infringement against us with respect to our
products and technology. Any claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management's attention
and resources, and could cause product shipment delays or require us to
reengineer our products or enter into royalty or licensing agreements.
Reengineering a particular product, however, may not be possible or practical.
Similarly, these royalty or licensing agreements, if required, may not be
available on acceptable terms, if at all.
ANTI-TAKEOVER PROVISIONS CONTAINED IN OUR CHARTER AND UNDER DELAWARE LAW COULD
IMPAIR A TAKEOVER ATTEMPT.
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law prohibiting, under some circumstances, publicly held Delaware
corporations from engaging in business combinations with some stockholders for a
specified period of time without the approval of the holders of substantially
all of our outstanding voting stock. Such provisions could delay or impede the
removal of incumbent directors and could make more difficult a merger, tender
offer or proxy contest involving us, even if such events could be beneficial, in
the short term, to the interests of the stockholders. In addition,
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such provisions could limit the price that some investors might be willing to
pay in the future for shares of our Common Stock. These provisions, in addition
to provisions contained in our charter, may have the effect of deterring hostile
takeovers or delaying changes in our control or management.
OUR STOCK PRICE IS VOLATILE
The market price of our Common Stock has been and may continue to be
subject to wide fluctuations. Our stock price may fluctuate in response to a
number of events and factors, such as quarterly variations in operating results,
announcements of technological innovations or new products and media properties
by us or our competitors, announcements of technological alliances and
partnerships, changes in financial estimates and recommendations by securities
analysts, the operating and stock price performance of other companies that
investors may deem comparable, and news reports relating to trends in our
markets. In addition, the stock market in general, and the market prices for
Internet-related companies in particular, have experienced extreme volatility
that often has been unrelated to the operating performance of such companies.
These broad market and industry fluctuations may adversely affect the price of
our stock, regardless of our operating performance. In the past, companies that
have experienced volatility in the market price of their stock have been the
subjects of securities class action litigation. If we were the subject of
securities class action litigation, it could result in substantial costs and a
diversion of management's attention and resources.
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USE OF PROCEEDS
Unless otherwise indicated in the prospectus supplement, the net proceeds
from the sale of securities offered by this prospectus will be used for general
corporate purposes, including capital expenditures and to meet working capital
needs. We expect from time to time to evaluate the acquisition of businesses,
products and technologies for which a portion of the net proceeds may be used.
Pending such uses, we will invest the net proceeds in interest-bearing
securities.
RATIO OF EARNINGS TO COVER FIXED CHARGES AND PREFERRED DIVIDENDS
As we have incurred losses in each of the periods presented below, we had
insufficient earnings to cover fixed charges and preferred dividends, if any, by
the following amounts:
NINE MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED
--------------------------------- JUNE 30,
1998 1999 2000 2001
--------- --------- --------- -----------
$29,915 $33,028 $23,814 $250,663
Please refer to Exhibit 12.1 filed with this prospectus for additional
information regarding the ratio of earnings to cover fixed charges and preferred
dividends, if any.
DESCRIPTION OF COMMON STOCK
Our certificate of incorporation authorizes us to issue up to
1,500,000,000 shares of common stock, $0.001 par value. As of August 1, 2001,
there were approximately 129,060,741 shares of our common stock issued and
outstanding.
The holders of shares of our common stock are entitled to one vote per
share on all matters to be voted on by stockholders. Each holder of common stock
is entitled to one vote per share. Upon any liquidation, dissolution or winding
up of our business, the holders of common stock are entitled to share equally in
all assets available for distribution after payment of all liabilities and
provision for liquidation preference of shares of preferred stock then
outstanding. The holders of common stock have no preemptive rights and no rights
to convert their common stock into any other securities. There are also no
redemption or sinking fund provisions applicable to our common stock. All
outstanding shares of common stock are fully paid and nonassessable. Holders of
common stock are entitled to receive dividends declared by the Board of
Directors, out of funds legally available for the payment of dividends, subject
to the rights of holders of any then-outstanding shares of preferred stock. We
have never paid a cash dividend, however, and do not anticipate paying cash
dividends for the foreseeable future.
The transfer agent and registrar for our common stock is Wells Fargo Bank
Minnesota.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the time that such stockholder
became an interested stockholder, unless:
(1) prior to such time, the board of directors of the
corporation approved either the business combination or the transaction
that resulted in the stockholder's becoming an interested stockholder,
(2) upon consummation of the transaction that resulted in the
stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
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corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares
owned:
- by persons who are directors and also officers, and
- by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held
subject to the plan will be tendered in a tender or exchange
offer, or
(3) at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of the stockholders, and not by written consent, by the
affirmative vote of at least 66 2/3% of the outstanding voting stock that
is not owned by the interested stockholder.
Section 203 defines "business combination" to include:
(1) any merger or consolidation involving the corporation and
the interested stockholder,
(2) any sale, transfer, pledge or other disposition of 10% or
more of the assets of the corporation involving the interested
stockholder,
(3) subject to certain exceptions, any transaction that results
in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder,
(4) any transaction involving the corporation that has the
effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder, or
(5) the receipt by the interested stockholder of the benefit of
any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
In general, Section 203 defines an "interested stockholder" as any entity
or person who or which beneficially owns (or within three years did own) 15% or
more of the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
The existence of this provision would be expected to have an
anti-takeover effect with respect to transactions not approved in advance by our
board of directors, including discouraging attempts that might result in a
premium over the market price for the shares of common stock held by
stockholders.
DESCRIPTION OF SHARE PURCHASE RIGHTS PLAN
On June 30, 2000, our board of directors adopted a share purchase rights
plan, commonly known as a "poison pill." Pursuant to our rights plan, our board
of directors declared a dividend of one right to purchase one one-thousandth
share of our series A participating preferred stock for each outstanding share
of common stock. The rights are triggered and become exercisable upon the
acquisition of or offer to acquire at least 15% of our common stock then
outstanding. The rights plan is designed to protect and maximize the value of
the outstanding equity interests in Inktomi in the event of an unsolicited
attempt by an acquirer to take over Inktomi in a manner or on terms not approved
by our board of directors. Takeover attempts frequently include coercive tactics
to deprive the board of directors and its stockholders of any real opportunity
to determine the destiny of the company. The rights plan has been declared by
our board of directors in order to deter such tactics, including a gradual
accumulation of shares in the open market of 15% or greater position to be
followed by a merger or a partial or two-tier tender offer that does not treat
all stockholders equally. These tactics unfairly pressure stockholders, squeeze
them out of their investment without giving them any real choice and deprive
them of the full value of their shares. The rights plan is not intended to, and
will not, prevent our takeover.
Our Form 8-A, filed on August 11, 2000 and incorporated in this
prospectus by reference, contains a more detailed summary of the principal terms
of the rights plan.
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DESCRIPTION OF PREFERRED STOCK
Our certificate of incorporation authorizes us to issue up to 10,000,000
shares of preferred stock in one or more series. As of August 1, 2001, we did
not have any outstanding shares of preferred stock or options to purchase
preferred stock (other than the rights to purchase shares of our series A
participating preferred stock which were granted in connection with the share
purchase rights plan described above). Our board of directors, however, has the
authority, without stockholder consent, subject to certain limitations imposed
by law or our bylaws, to issue one or more series of preferred stock at any
time. The rights, preferences and restrictions of the preferred stock of each
series will be fixed by the certificate of designations relating to each series.
In connection with the adoption of the rights plan, we filed a certificate of
designation that designated 310,000 shares of our authorized preferred stock as
series A participating preferred stock. A prospectus supplement relating to each
such series will specify the terms of the preferred stock as determined by our
board of directors, including the following:
- the number of shares in any series,
- the designation for any series by number, letter or title that shall
distinguish the series from any other series of preferred stock,
- the dividend rate and whether dividends on that series of preferred
stock will be cumulative, noncumulative or partially cumulative,
- the voting rights of that series of preferred stock, if any,
- the conversion provisions applicable to that series of preferred stock,
- the redemption or sinking fund provisions applicable to that series of
preferred stock, if any,
- the liquidation preference per share of that series of preferred stock,
if any, and
- the terms of any other preferences or rights, if any, applicable to
that series of preferred stock.
We will describe the specific terms of a particular series of preferred
stock in the prospectus supplement relating to that series. In the event we
issue shares of preferred stock, however, you should refer to the applicable
certificate of designation that we will file with the Delaware Secretary of
State and the Securities and Exchange Commission for a more complete description
of the rights, privileges, and preferences of the security. The prospectus
supplement may also contain a description of any material U.S. federal income
tax consequences relating to the preferred stock.
Although it has no present intention to do so, our board of directors,
without stockholder approval, may issue preferred stock with voting and
conversion rights that could adversely affect the voting power of the holders of
common stock. If we issue preferred stock, it may have the effect of delaying,
deferring or preventing a change of control.
Our share purchase rights plan, described above, as well as certain
provisions of our restated certificate of incorporation and bylaws, may have the
effect of preventing, discouraging or delaying any change in control. The
authorization of undesignated preferred stock makes it possible for our board of
directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to obtain control of us. There are
also a substantial number of authorized but unissued shares of our common stock
that could be issued for similar purposes.
DESCRIPTION OF THE DEPOSITARY SHARES
At our option, we may elect to offer fractional shares of preferred
stock, rather than full shares of preferred stock. If we do, we will issue to
the public receipts for depositary shares and each of these depositary shares
will represent a fraction of a share of a particular series of preferred stock,
as specified in the applicable prospectus supplement. Each owner of a depositary
share will be entitled, in proportion to the applicable fractional interest in
shares of preferred stock underlying that depositary share, to all rights
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and preferences of the preferred stock underlying that depositary share. These
rights may include dividend, voting, redemption and liquidation rights.
The shares of preferred stock underlying the depositary shares will be
deposited with a bank or trust company selected by us to act as depositary,
under a deposit agreement between us, the depositary and the holders of the
depositary receipts. The depositary will be the transfer agent, registrar and
dividend disbursing agent for the depositary shares.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the depositary agreement. Holders of depositary receipts will agree
to be bound by the deposit agreement, which requires holders to take certain
actions such as filing proof of residence and paying certain charges.
If we issue any depository shares, for a more complete description of
their terms, you should refer to the forms of the deposit agreement, our
certificate of incorporation and the certificate of amendment for the applicable
series of preferred stock that are, or will be, filed with the Securities and
Exchange Commission.
DIVIDENDS
The depositary will distribute all cash dividends or other cash
distributions received in respect of the series of preferred stock underlying
the depositary shares to the record holders of depositary receipts in proportion
to the number of depositary shares owned by those holders on the relevant record
date, which will be the same date as the record date for the preferred stock.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
that are entitled to receive the distribution, unless the depositary determines
that it is not feasible to make the distribution. If this occurs, the
depositary, with our approval, may adopt another method for the distribution,
including selling the property and distributing the net proceeds to the holders.
LIQUIDATION PREFERENCE
If a series of preferred stock underlying the depositary shares has a
liquidation preference, in the event of the voluntary or involuntary
liquidation, dissolution or winding up of Inktomi, holders of depositary shares
will be entitled to receive the fraction of the liquidation preference accorded
each share of the applicable series of preferred stock, as set forth in the
applicable prospectus supplement.
REDEMPTION
If a series of preferred stock underlying the depositary shares is
subject to redemption, the depositary shares will be redeemed from the proceeds
received by the depositary resulting from the redemption, in whole or in part,
of the preferred stock held by the depositary. If we redeem any preferred stock
held by the depositary, the depositary will redeem, as of the same redemption
date, the number of depositary shares representing the preferred stock so
redeemed. The depositary will mail the notice of redemption to the record
holders of the depositary receipts promptly upon receiving the notice from us
and fewer than 20 or more than 60 days, unless otherwise provided in the
applicable prospectus supplement, prior to the date fixed for redemption of the
preferred stock.
VOTING
Upon receipt of notice of any meeting at which the holders of preferred
stock are entitled to vote, the depositary will mail the information contained
in the notice of meeting to the record holders of the depositary receipts
underlying the preferred stock. Each record holder of those depositary receipts
on the record date will be entitled to instruct the depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
underlying that holder's depositary shares. The record date for the depositary
will be the same date as the record date for the preferred stock. The depositary
will try, as far as practicable, to vote the preferred stock underlying the
depositary shares in accordance with such
14
instructions, and we will agree to take all action which may be deemed necessary
by the depositary in order to enable the depositary to do so. The depositary
will not vote the preferred stock to the extent that it does not receive
specific instructions from the holders of depositary receipts.
WITHDRAWAL OF PREFERRED STOCK
Owners of depositary shares are entitled, upon surrender of depositary
receipts at the principal office of the depositary and payment of any unpaid
amount due to the depositary, to receive the number of whole shares of preferred
stock underlying the depositary shares. Partial shares of preferred stock will
not be issued. Holders of preferred stock will not be entitled to deposit the
shares under the deposit agreement or to receive depositary receipts evidencing
depositary shares for the preferred stock.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended at any time and from time to
time by agreement between us and the depositary. However, any amendment which
materially and adversely alters the rights of the holders of depositary shares,
other than fee changes, will not be effective unless the amendment has been
approved by at least a majority of the depositary shares then outstanding. The
deposit agreement may be terminated by the depositary or us only if:
- all outstanding depositary shares have been redeemed, or
- there has been a final distribution of the preferred stock in
connection with our dissolution and such distribution has been made to
all the holders of depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangement. We will also pay
charges of the depositary in connection with the initial deposit of the
preferred stock, the initial issuance of the depositary shares, any redemption
of the preferred stock, and all withdrawals of preferred stock by owners of
depositary shares. Holders of depositary receipts will pay transfer, income and
other taxes and governmental charges and other specified charges as provided in
the deposit agreement for their accounts. The depositary may refuse to transfer
depositary shares, withhold dividends and distributions and sell the depositary
shares evidenced by the depositary receipt if the charges have not been paid.
MISCELLANEOUS
The depositary will forward to the holders of depositary receipts all
reports and communications we deliver to the depositary that we are required to
furnish to the holders of the preferred stock. In addition, the depositary will
make available for inspection by holders of depositary receipts at the principal
office of the depositary, and at such other places as it may from time to time
deem advisable, any reports and communications we deliver to the depositary as
the holder of preferred stock.
Neither the depositary nor Inktomi will be liable if either of the
depositary or Inktomi is prevented or delayed by law or any circumstance beyond
our control in performing our respective obligations under the deposit
agreement. Our obligations and the depositary's obligations will be limited to
the performance in good faith of our respective duties under the deposit
agreement. Neither the depositary nor Inktomi will be obligated to prosecute or
defend any legal proceeding in respect of any depositary shares or preferred
stock unless satisfactory indemnity is furnished. Inktomi and the depositary may
rely on written advice of counsel or accountants, on information provided by
holders of depositary receipts or other persons believed in good faith to be
competent to give such information, and on documents believed to be genuine and
to have been signed or presented by the proper party or parties.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering a notice to us of its
election to do so. We may remove the depositary at any time. Any such
resignation or removal will take effect upon the appointment of a successor
depositary and its acceptance of such appointment. The successor depositary must
be appointed within 60 days after delivery of the notice for resignation or
removal and must be a bank and trust company having its principal office in the
United States of America and having a combined capital and surplus of at least
$150,000,000.
FEDERAL INCOME TAX CONSEQUENCES
Owners of the depositary shares will be treated for Federal income tax
purposes as if they were owners of the preferred stock underlying the depositary
shares. As a result, owners will be entitled to take into account for Federal
income tax purposes and deductions to which they would be entitled if they were
holders of such preferred stock. No gain or loss will be recognized for Federal
income tax purposes upon the withdrawal of preferred stock in exchange for
depositary shares. The tax basis of each share of preferred stock to an
exchanging owner of depositary shares will, upon such exchange, be the same as
the aggregate tax basis of the depositary shares exchanged. The holding period
for preferred stock in the hands of an exchanging owner of depositary shares
will include the period during which such person owned such depositary shares.
DESCRIPTION OF THE WARRANTS
We may issue warrants for the purchase of preferred stock or common
stock. Warrants may be issued independently or together with preferred stock or
common stock and may be attached to or separate from any offered securities.
Each series of warrants will be issued under a separate warrant agreement to be
entered into between us and a bank or trust company, as warrant agent. The
warrant agent will act solely as our agent in connection with the warrants and
will not have any obligation or relationship of agency or trust for or with any
holders or beneficial owners of warrants. This summary of certain provisions of
the warrants is not complete. For the complete terms of a particular series of
warrants, you should refer to the prospectus supplement for that series of
warrants.
The prospectus supplement relating to a particular series of warrants to
purchase our common stock or preferred stock will describe the terms of the
warrants, including the following:
- the title of the warrants,
- the offering price for the warrants, if any,
- the aggregate number of the warrants,
- the designation and terms of the common stock or preferred stock that
may be purchased upon exercise of the warrants,
- if applicable, the designation and terms of the securities with which
the warrants are issued and the number of warrants issued with each
security,
- if applicable, the date from and after which the warrants and any
securities issued with the warrants will be separately transferable,
- the number of shares of common stock or preferred stock that may be
purchased upon exercise of a warrant and the price at which such shares
may be purchased upon exercise,
- the dates on which the right to exercise the warrants shall commence
and expire,
- if applicable, the minimum or maximum amount of the warrants that may
be exercised at any one time,
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- the currency or currency units in which the offering price, if any, and
the exercise price are payable,
- if applicable, a discussion of material United States Federal income
tax considerations,
- the antidilution provisions of the warrants, if any,
- the redemption or call provisions, if any, applicable to the warrants,
and
- any additional terms of the warrants, including terms, procedures, and
limitations relating to the exchange, exercise and settlement of the
warrants.
Holders of equity warrants will not be entitled, by virtue of being such
holders, to vote, consent, receive dividends, receive notice as stockholders
with respect to any meeting of stockholders for the election of our directors or
any other matter, or to exercise any rights whatsoever as our stockholders.
The exercise price payable and the number of shares of common stock or
preferred stock purchasable upon exercise of each equity warrant will be subject
to adjustment in certain events, including the issuance of a stock dividend to
holders of common stock or preferred stock or a stock split, reverse stock
split, combination, subdivision or reclassification of common stock or preferred
stock.
PLAN OF DISTRIBUTION
We may sell the securities:
- through one or more underwriters or dealers,
- directly to purchasers,
- through agents, or
- through a combination of any of these methods of sale.
We may distribute the securities:
- from time to time in one or more transactions at a fixed price or
prices, which may be changed from time to time,
- at market prices prevailing at the times of sale,
- at prices related to such prevailing market prices, or
- at negotiated prices.
We will describe the method of distribution of each series of securities
in the applicable prospectus supplement.
We may determine the price or other terms of the securities offered under
this prospectus by use of an electronic auction. We will describe how any
auction will determine the price or any other terms, how potential investors may
participate in the auction and the nature of the obligations of the underwriter,
dealer or agent in the applicable prospectus supplement.
Underwriters, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from us or our purchasers (as their agents
in connection with the sale of securities). These underwriters, dealers or
agents may be considered to be underwriters under the Securities Act. As a
result, discounts, commissions, or profits on resale received by the
underwriters, dealers or agents may be treated as underwriting discounts and
commissions. Each prospectus supplement will identify any such underwriter,
dealer or agent, and describe any compensation received by them from us. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
17
Underwriters, dealers and agents may be entitled to indemnification by us
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments made by the underwriters,
dealers or agents, under agreements between us and the underwriters, dealers and
agents.
We may grant underwriters who participate in the distribution of
securities an option to purchase additional securities to cover over-allotments,
if any, in connection with the distribution.
Some securities which we may issue under this prospectus may be new
issues of securities with no established trading market. Underwriters involved
in the public offering and sale of these series of securities may make a market
in the securities. However, they are not obligated to make a market and may
discontinue market making activity at any time. No assurance can be given as to
the liquidity of the trading market for any securities.
Underwriters or agents and their associates may be customers of, engage
in transactions with or perform services for us in the ordinary course of
business.
LEGAL MATTERS
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, will pass upon the validity of the issuance of the securities
offered by this prospectus.
INDEPENDENT ACCOUNTANTS
The financial statements as of September 30, 2000 and 1999 and for each
of the three years in the period ended September 30, 2000 incorporated in this
prospectus by reference to the Current Report on Form 8-K dated August 16, 2001
of Inktomi, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the
Securities and Exchange Commission, in accordance with the Securities Exchange
Act of 1934.
Public Reference Room Chicago Regional Office
450 Fifth Street, N.W. Citicorp Center
Room 1024 500 West Madison Street
Washington, D.C. 20549 Suite 1400
1-800-SEC-0330 Chicago, Illinois 60661-2511
Please call the Commission at 1-800-SEC-0330 for further information
about the public reference rooms. Our reports, proxy statements and other
information filed with the Commission are available to the public over the
Internet at the Commission's World Wide Web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information
that we file with them. This means that we can disclose important information to
you in this prospectus by referring you to another document filed separately
with the Securities and Exchange Commission. The information incorporated by
reference is considered to be a part of this prospectus, and information that we
file later with the Commission will automatically update and supersede this
information.
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We incorporate by reference in this prospectus the documents listed below
and any future filings made by us with the Commission under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act until our offering is complete:
- Annual Report on Form 10-K for the fiscal year ended September 30,
2000;
- Amended Annual Report on Form 10K/A for the fiscal year ended September
30, 2000;
- Quarterly Report on Form 10-Q for the fiscal quarter ended December 31,
2000;
- Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2001;
- Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2001;
- Current Report on Form 8-K, filed November 8, 2000;
- Amended Current Report on Form 8-K/A, filed January 9, 2001;
- Current Report on Form 8-K, filed January 12, 2001;
- Amended Current Report on Form 8-K/A, filed March 13, 2001;
- Current Report on Form 8-K, filed April 12, 2001;
- Current Report on Form 8-K, filed August 16, 2001;
- Form 8-A12G, filed August 11, 2000;
- Form 8-A12G, filed May 22, 1998.
We will provide to each person who so requests, including any beneficial
owner to whom a prospectus is delivered, a copy of these filings. You may
request a copy of these filings, at no cost, by writing or telephoning us at the
following address:
Timothy Stevens
Senior Vice President of Business Affairs and General Counsel
Inktomi Corporation
4100 E. Third Avenue
Foster City, CA 94404
(650) 653-2800
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
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12,500,000 SHARES
[INKTOMI LOGO]
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
THOMAS WEISEL PARTNERS LLC
OCTOBER 30, 2001
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