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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

|    |  |                                                                                       
|--- |  | --------------------------------------------------------------------------------------
|[x] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002

Commission File Number 0-24339



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INKTOMI CORPORATION

(Exact name of Registrant as specified in its charter)



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|                                  |  |                                                
|--------------------------------- |  | -----------------------------------------------
|Delaware
(State of Incorporation) |  | 94-3238130
(I.R.S. Employer Identification No.)

4100 East Third Avenue
Foster City, California 94404
(Address of principal executive offices)

(650) 653-2800
(Registrants telephone number, including area code)______________

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yesx   No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Exchange Act).

Yes  x    No o

The number of shares outstanding of the Registrants Common Stock, $0.001 par
value, as of January 31, 2003 was 163,157,711.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. Financial Statements                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                              | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION   
|                              | Item 1. Legal Proceedings.                                                                   
|                              | Item 3. Defaults Upon Senior Securities                                                      
|                              | Item 5. Other Information                                                                    
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|                              | SIGNATURE                                                                                    
|                              | CERTIFICATIONS                                                                               
|EXHIBIT 10.37                
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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INKTOMI CORPORATION
FORM 10-Q
For the Quarterly Period Ended December 31, 2002

TABLE OF CONTENTS

|                               |                |                                                                                               |                                          |                                                                                                          |    |      |   | 
|------------------------------ | -------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------- | -------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                |                                                                                               |                                          |                                                                                                          |    | Page
|                               |                |                                                                                               |                                          |                                                                                                          |    |     
|Part
I. Financial Information: |                |                                                                                               |                                          |                                                                                                         
|                               |                | Item 1. Financial Statements (Unaudited)                                                      |                                          |                                                                                                          |    |     
|                               |                |                                                                                               |                                          | a) Condensed Consolidated Statements of Operations for
the three months ended December 31, 2002 and 2001 |    |      | 3 | 
|                               |                |                                                                                               |                                          | b) Condensed Consolidated Balance Sheets as of December
31, 2002 and September 30, 2002                  |    |      | 4 | 
|                               |                |                                                                                               |                                          | c) Condensed Consolidated Statements of Cash Flows for
the three months ended December 31, 2002 and 2001 |    |      | 5 | 
|                               |                |                                                                                               |                                          | d) Notes to Condensed Consolidated Financial Statements                                                  |    |      | 6 | 
|                               |                | Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                          |                                                                                                          | 20 |     
|                               |                | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                          |                                                                                                          | 39 |     
|                               |                | Item 4. Controls and Procedures                                                               |                                          |                                                                                                          | 40 |     
|Part
II. Other Information:    |                |                                                                                               |                                          |                                                                                                         
|                               |                |                                                                                               | Item 1. Legal Proceedings                |                                                                                                          |    | 40   |  
|                               |                |                                                                                               | Item 3. Defaults in Senior Securities    |                                                                                                          |    | 42   |  
|                               |                |                                                                                               | Item 5. Other Information                |                                                                                                          |    | 42   |  
|                               |                |                                                                                               | Item 6. Exhibits and Reports on Form 8-K |                                                                                                          |    | 42   |  
|                               | Signature      |                                                                                               |                                          | 43                                                                                                       |   
|                               | Certifications |                                                                                               |                                          | 44                                                                                                       |   

This report on Form 10-Q and other oral and written statements made by the
Company to the public contain and incorporate 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. When used in this report, the words
anticipate, believe, expect, intend, may, will and similar
expressions identify forward-looking statements. Forward-looking statements in
this report include, but are not limited to, those relating to the general
direction of our business; our pending acquisition by Yahoo!, Inc.; our ability to
successfully penetrate the information retrieval market; our ability to
continue to support the service provider market; our success generating sales
through our alliances and partners; our ability to introduce new products and
services and enhance existing products and services to meet customer needs; the
changing composition and purchasing trends of our customer base; the
composition of our revenues; our expected expenses for future periods; the
outcome of our restructuring efforts; 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 technologies; the possibility of acquiring complementary
businesses, products, services and technologies; the impact of dispositions; 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 report. Important
factors that could cause actual results to differ materially from our
forward-looking statements are set forth in this report under the headings
Factors Affecting Operating Results, Managements Discussion and Analysis
of Financial Condition and Results of Operations 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

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general economic factors and business strategies, may be significant,
presently or in the future, and the factors set forth in this report may affect
us to a greater extent than indicated. You should not rely on these
forward-looking statements, which reflect our position as of the date of this
report. We do not assume any obligation to revise forward-looking statements.

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PART I. FINANCIAL INFORMATION




ITEM 1.Financial Statements

INKTOMI CORPORATION




CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS


|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |       |         |        | 
|--------------------------------------------------------------- | --------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ----- | ---------------------------------------------------- | ------ | ------- | ----- | ------- | ------ | 
|                                                                |                                               |                                                                                                                                                   |                          |       | For the Three                                       
|                                                                |                                               |                                                                                                                                                   |                          |       | Months Ended                                        
|                                                                |                                               |                                                                                                                                                   |                          |       | December 31,                                        
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                     
|                                                                |                                               |                                                                                                                                                   |                          |       | 2002                                                 |        | 2001   
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |        
|                                                                |                                               |                                                                                                                                                   |                          |       | (Unaudited)
(In thousands, except per share amounts)
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                     
|Revenues                                                        |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               | Web search services                                                                                                                               |                          | $     | 9,975                                                |        |         | $     | 10,628  |       
|                                                                |                                               | Licenses                                                                                                                                          |                          |       | 1,810                                                |        |         |       | 17,440  |       
|                                                                |                                               | Maintenance services                                                                                                                              |                          |       | 1,720                                                |        |         |       | 2,418   |       
|                                                                |                                               | Other services                                                                                                                                    |                          |       | 350                                                  |        |         |       | 2,564   |       
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               |                                                                                                                                                   | Total revenues           |       |                                                      | 13,855 |         |       |         | 33,050 | 
|Cost of Revenues                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               | Web search services                                                                                                                               |                          |       | 2,881                                                |        |         |       | 4,277   |       
|                                                                |                                               | Licenses                                                                                                                                          |                          |       | 585                                                  |        |         |       | 329     |       
|                                                                |                                               | Maintenance services                                                                                                                              |                          |       | 477                                                  |        |         |       | 1,118   |       
|                                                                |                                               | Other services                                                                                                                                    |                          |       | 368                                                  |        |         |       | 2,041   |       
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               |                                                                                                                                                   | Total cost of revenues   |       |                                                      | 4,311  |         |       |         | 7,765  | 
|Gross Profit                                                    |                                               |                                                                                                                                                   | 9,544                    |       |                                                      |        | 25,285  |      
|Operating expenses                                              |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               | Sales and marketing                                                                                                                               |                          |       | 2,943                                                |        |         |       | 17,988  |       
|                                                                |                                               | Research and development                                                                                                                          |                          |       | 5,087                                                |        |         |       | 12,925  |       
|                                                                |                                               | General and administrative                                                                                                                        |                          |       | 3,127                                                |        |         |       | 5,182   |       
|                                                                |                                               | Amortization of goodwill and other intangibles                                                                                                    |                          |       |                                                     |        |         |       | 539     |       
|                                                                |                                               | Restructuring                                                                                                                                     |                          |       | 18,854                                               |        |         |       | 2,638   |       
|                                                                |                                               | Impairment of fixed assets and loss on asset sale                                                                                                 |                          |       | 5,358                                                |        |         |       | 1,300   |       
|                                                                |                                               | Impairment of goodwill and other intangibles                                                                                                      |                          |       |                                                     |        |         |       | 1,750   |       
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               |                                                                                                                                                   | Total operating expenses |       |                                                      | 35,369 |         |       |         | 42,322 | 
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Operating loss                                                  |                                               |                                                                                                                                                   | (25,825                  | )     |                                                      |        | (17,037 | )    
|Other income, net                                               |                                               |                                                                                                                                                   | 1,413                    |       |                                                      |        | 3,363   |      
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Loss before income tax provision                                |                                               |                                                                                                                                                   | (24,412                  | )     |                                                      |        | (13,674 | )    
|Income tax provision                                            |                                               |                                                                                                                                                   | (27                      | )     |                                                      |        | (189    | )    
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Net loss from continuing operations                             |                                               |                                                                                                                                                   | (24,439                  | )     |                                                      |        | (13,863 | )    
|Discontinued Operations                                         |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                |                                               | Income (Loss) from discontinued operations net
of tax effect (Including gain on disposal of
$12,396 for the three months ended December 31,
2002) |                          |       | 7,487                                                |        |         |       | (15,578 | )     
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Net Loss                                                        |                                               | $                                                                                                                                                 | (16,952                  | )     |                                                      | $      | (29,441 | )    
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Earnings per share                                              |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Basic and diluted net loss per share                            |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|                                                                | Net loss per share from continuing operations |                                                                                                                                                   | $                        | (0.15 | )                                                    |        | $       | (0.10 | )      
|Net income (loss) from discontinued operations                  |                                               |                                                                                                                                                   | 0.05                     |       |                                                      |        | (0.12   | )    
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Net Loss                                                        |                                               | $                                                                                                                                                 | (0.10                    | )     |                                                      | $      | (0.22   | )    
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Weighted average shares outstanding                             |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      
|Shares used in calculating basic and
diluted net loss per share |                                               |                                                                                                                                                   | 162,284                  |       |                                                      |        | 136,660 |      
|                                                                |                                               |                                                                                                                                                   |                          |       |                                                      |        |         |      

The accompanying notes are an integral part of these condensed consolidated
financial statements.

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INKTOMI CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS




|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                   |         |  |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------------------------- | ------------------------------------ | ------ | ------ | ---------------------------------------- | -------- | ----------------- | ------- |  |  | 
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        | December 31,                             |          |                   |         | 
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        | 2002                                     |          | September
30,2002
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        | (Unaudited)                             
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        | (In thousands, except per share amounts)
|                                                                                                                                                                                                          |                                              |                                                            |                                      | Assets |        |                                          |          |                   |         |  |  | 
|Current assets                                                                                                                                                                                            |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          | Cash and cash equivalents                    |                                                            | $                                    | 44,365 |        |                                          | $        | 17,292            |        
|                                                                                                                                                                                                          | Short-term investments                       |                                                            |                                      | 14,695 |        |                                          |          | 28,115            |        
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total cash and cash equivalents and short-term investments |                                      |        | 59,060 |                                          |          |                   | 45,407  | 
|                                                                                                                                                                                                          | Accounts receivable, net                     |                                                            |                                      | 3,301  |        |                                          |          | 10,864            |        
|                                                                                                                                                                                                          | Prepaid expenses and other current assets    |                                                            |                                      | 3,715  |        |                                          |          | 5,533             |        
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total current assets                                       |                                      |        | 66,076 |                                          |          |                   | 61,804  | 
|Investments in equity securities                                                                                                                                                                          |                                              |                                                            | 551                                  |        |        |                                          | 331      |                  
|Property and equipment, net                                                                                                                                                                               |                                              |                                                            | 15,642                               |        |        |                                          | 62,536   |                  
|Goodwill, net                                                                                                                                                                                             |                                              |                                                            |                                     |        |        |                                          | 8,207    |                  
|Other intangibles, net                                                                                                                                                                                    |                                              |                                                            |                                     |        |        |                                          | 1,821    |                  
|Other assets                                                                                                                                                                                              |                                              |                                                            | 3,643                                |        |        |                                          | 4,708    |                  
|Loans to related parties                                                                                                                                                                                  |                                              |                                                            | 5,895                                |        |        |                                          | 5,809    |                  
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total assets                                               |                                      | $      | 91,807 |                                          |          | $                 | 145,216 | 
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              |                                                            | Liabilities and Stockholders Equity |        |        |                                          |          |                   |         |  | 
|Current liabilities                                                                                                                                                                                       |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          | Accounts payable                             |                                                            | $                                    | 2,423  |        |                                          | $        | 10,021            |        
|                                                                                                                                                                                                          | Accrued liabilities                          |                                                            |                                      | 29,025 |        |                                          |          | 30,180            |        
|                                                                                                                                                                                                          | Deferred revenue                             |                                                            |                                      | 15,160 |        |                                          |          | 26,767            |        
|                                                                                                                                                                                                          | Current portion of notes payable             |                                                            |                                      | 2,373  |        |                                          |          | 30,003            |        
|                                                                                                                                                                                                          | Current portion of capital lease obligations |                                                            |                                      | 1,014  |        |                                          |          | 1,210             |        
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total current liabilities                                  |                                      |        | 49,995 |                                          |          |                   | 98,181  | 
|Capital lease obligations, less current portion                                                                                                                                                           |                                              |                                                            |                                     |        |        |                                          | 216      |                  
|Other liabilities                                                                                                                                                                                         |                                              |                                                            | 10,927                               |        |        |                                          | 185      |                  
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total liabilities                                          |                                      |        | 60,922 |                                          |          |                   | 98,582  | 
|Commitments and contingencies (Note 6)                                                                                                                                                                    |                                              |                                                            |                                      |        |        |                                          |          |                  
|Stockholders equity                                                                                                                                                                                      |                                              |                                                            |                                      |        |        |                                          |          |                  
|Common Stock, $0.001 par value; 1,500,000 authorized at
December 31, 2002 and September 30, 2002, respectively;
162,891 and 162,109 outstanding at December 31, 2002 and
September 30, 2002, respectively |                                              |                                                            | 163                                  |        |        |                                          | 162      |                  
|Additional paid-in capital                                                                                                                                                                                |                                              |                                                            | 951,814                              |        |        |                                          | 952,602  |                  
|Deferred compensation and other                                                                                                                                                                           |                                              |                                                            | (460                                 | )      |        |                                          | (2,039   | )                
|Accumulated other comprehensive loss                                                                                                                                                                      |                                              |                                                            | (865                                 | )      |        |                                          | (1,276   | )                
|Accumulated deficit                                                                                                                                                                                       |                                              |                                                            | (919,767                             | )      |        |                                          | (902,815 | )                
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total stockholders equity                                 |                                      |        | 30,885 |                                          |          |                   | 46,634  | 
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  
|                                                                                                                                                                                                          |                                              | Total liabilities and stockholders equity                 |                                      | $      | 91,807 |                                          |          | $                 | 145,216 | 
|                                                                                                                                                                                                          |                                              |                                                            |                                      |        |        |                                          |          |                  

The accompanying notes are an integral part of these condensed consolidated
financial statements.

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INKTOMI CORPORATION

CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS


|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  |  |  | 
|--------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------- | -------------------------------------- | ------- | ---- | ------- | ------- | ------- | - |  |  |  | 
|                                                                            |                                                               |                                                                                  |         | For the Three Month Ended December 31, |         |      |         |        
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |        
|                                                                            |                                                               |                                                                                  |         | 2002                                   |         | 2001 |         |         |         |  
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |  
|                                                                            |                                                               |                                                                                  |         | (Unaudited)                            |         |      |         |        
|                                                                            |                                                               |                                                                                  |         | (In thousands)                         |         |      |         |        
|Cash flows from operating activities from continuing operations             |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|Net loss from continuing operations                                         |                                                               | $                                                                                | (24,439 | )                                      |         | $    | (13,863 | )       |         |   |  | 
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            | Non cash portion of restructuring charge                      |                                                                                  |         | 16,320                                 |         |      |         | 215     |         |   |  |  | 
|                                                                            | Amortization of intangibles and other assets                  |                                                                                  |         |                                       |         |      |         | 539     |         |   |  |  | 
|                                                                            | Depreciation                                                  |                                                                                  |         | 2,445                                  |         |      |         | 6,866   |         |   |  |  | 
|                                                                            | Stock based compensation                                      |                                                                                  |         | 136                                    |         |      |         | 1,978   |         |   |  |  | 
|                                                                            | Impairment of intangibles and other assets                    |                                                                                  |         |                                       |         |      |         | 1,750   |         |   |  |  | 
|                                                                            | Loss on sale of building                                      |                                                                                  |         | 3,441                                  |         |      |         |        |         |   |  |  | 
|                                                                            | Impairment of property and equipment                          |                                                                                  |         | 1,917                                  |         |      |         | 1,300   |         |   |  |  | 
|                                                                            | Provision for doubtful accounts                               |                                                                                  |         | 201                                    |         |      |         | 710     |         |   |  |  | 
|Changes in assets and liabilities:                                          |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            | Accounts receivable                                           |                                                                                  |         | 4,608                                  |         |      |         | 95      |         |   |  |  | 
|                                                                            | Prepaid expenses and other assets                             |                                                                                  |         | 2,193                                  |         |      |         | 3,712   |         |   |  |  | 
|                                                                            | Accounts payable                                              |                                                                                  |         | (8,172                                 | )       |      |         | (3,918  | )       |   |  |  | 
|                                                                            | Accrued liabilities and other                                 |                                                                                  |         | (6,569                                 | )       |      |         | (14,832 | )       |   |  |  | 
|                                                                            | Deferred revenue                                              |                                                                                  |         | (7,019                                 | )       |      |         | (3,704  | )       |   |  |  | 
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            |                                                               | Net cash used in operating activities from continuing operations                 |         |                                        | (14,938 | )    |         |         | (19,152 | ) |  |  |  | 
|Cash flows from investing activities from continuing operations             |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            | Purchases of property and equipment                           |                                                                                  |         | (2,742                                 | )       |      |         | (499    | )       |   |  |  | 
|                                                                            | Purchases of short-term investments                           |                                                                                  |         | (43,314                                | )       |      |         | (90,752 | )       |   |  |  | 
|                                                                            | Proceeds from sales and maturities of short-term investments  |                                                                                  |         | 56,749                                 |         |      |         | 50,852  |         |   |  |  | 
|                                                                            | Purchases of investments in equity securities                 |                                                                                  |         |                                       |         |      |         | (500    | )       |   |  |  | 
|                                                                            | Proceeds from sale of building                                |                                                                                  |         | 41,596                                 |         |      |         |        |         |   |  |  | 
|                                                                            | Proceeds from sales of investments in equity securities       |                                                                                  |         |                                       |         |      |         | 498     |         |   |  |  | 
|                                                                            | Loans to related parties                                      |                                                                                  |         | (87                                    | )       |      |         | (4,700  | )       |   |  |  | 
|                                                                            | Payments received on loans to related parties                 |                                                                                  |         |                                       |         |      |         | 2,700   |         |   |  |  | 
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            |                                                               | Net cash provided from (used in) investing activities from continuing operations |         |                                        | 52,202  |      |         |         | (42,401 | ) |  |  |  | 
|Cash flows from financing activities from continuing operations             |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            | Payments on notes payable                                     |                                                                                  |         | (27,630                                | )       |      |         | (1,106  | )       |   |  |  | 
|                                                                            | Payments on obligations under capital leases                  |                                                                                  |         | (412                                   | )       |      |         | (177    | )       |   |  |  | 
|                                                                            | Proceeds from issuance of common stock, net of issuance costs |                                                                                  |         |                                       |         |      |         | 52,839  |         |   |  |  | 
|                                                                            | Proceeds from exercises of stock options and warrants         |                                                                                  |         | 656                                    |         |      |         | 7,975   |         |   |  |  | 
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            |                                                               | Net cash provided from (used in) financing activities from continuing operations |         |                                        | (27,386 | )    |         |         | 59,531  |   |  |  |  | 
|Net Cash flow provided from discontinued operations                         |                                                               |                                                                                  | 17,183  |                                        |         |      | 1,716   |         |         |   |  | 
|                                                                            | Effect of exchange rates on cash and cash equivalents         |                                                                                  |         | 12                                     |         |      |         | (86     | )       |   |  |  | 
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            | Increase (decrease) in cash and cash equivalents              |                                                                                  |         | 27,073                                 |         |      |         | (392    | )       |   |  |  | 
|                                                                            | Cash and cash equivalents at beginning of period              |                                                                                  |         | 17,292                                 |         |      |         | 18,518  |         |   |  |  | 
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 
|                                                                            | Cash and cash equivalents at end of period                    |                                                                                  | $       | 44,365                                 |         |      | $       | 18,126  |         |   |  |  | 
|                                                                            |                                                               |                                                                                  |         |                                        |         |      |         |         |         |   |  | 

The accompanying notes are an integral part of these condensed consolidated
financial statements.

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. The Company and Basis of Presentation

Inktomi Corporation (Inktomi or the Company) was incorporated in
California in February 1996 and reincorporated in Delaware in February 1998.
Inktomi provides World Wide Web search services for Internet portal and search destination sites. Inktomi Web search provides a customizable, private label solution that offers portals and destination sites the ability to serve relevant search results. Inktomi Web search, through its paid inclusion services, provides content publishers greater access to end users through portal and destination site customers of our search engine services.

We have prepared the condensed consolidated financial statements included
herein pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the condensed consolidated financial
statements reflect all adjustments that are necessary for the fair presentation
of results for the periods shown. The results of operations for such periods
are not necessarily indicative of the results expected for the full fiscal year
or for any future period. These financial statements should be read in
conjunction with our audited consolidated financial statements and notes
thereto included in our annual report on Form 10-K for the year ended September
30, 2002 filed with the SEC on December 30, 2002.

On December 17, 2002, we consummated the divestiture of our Enterprise
Search division to Verity Inc. in a transaction accounted for as a sale of
assets. The Enterprise Search division is accounted for as a discontinued
operation and therefore, the results of operations and cash flows have been
reclassified from the Companys results of and cash flow from continuing
operations for all periods presented in this document.

The accompanying condensed consolidated financial statements include the
accounts of Inktomi Corporation and its wholly owned subsidiaries. All
intercompany accounts and transactions have been eliminated. Certain prior
period balances have been reclassified to conform to the current period
presentation.

On December 22, 2002, we entered into a definitive merger agreement with
Yahoo! Inc. Under the agreement, a newly incorporated wholly-owned subsidiary
of Yahoo! will merge with and into Inktomi, with Inktomi remaining as the
surviving legal entity and a wholly-owned subsidiary of Yahoo! Under the terms
of the merger agreement, upon completion of the merger, Yahoo! will pay to
Inktomis stockholders $1.65 per share for each share of Inktomi common stock
outstanding and will assume any outstanding options to purchase Inktomi common stock.

The merger is subject to a number of conditions including, among other
things, approval of Inktomis stockholders and regulatory approvals and
clearances, including under the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended. On February 10, 2003, the required waiting period under the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, expired. We
currently expect the merger to be completed in the quarter ending March 31,
2003. There can be no assurance that the merger will be consummated. In the
event that the proposed merger fails to close, under certain circumstances we
will be required to pay Yahoo! a termination fee of $11.2 million.

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Note 2. Discontinued Operations

On December 17, 2002, we completed the sale of our Enterprise Search
division to Verity, Inc. (Verity). In consideration
for the sale, Verity agreed to pay
$25.0 million in cash subject to certain adjustments, and assumed
certain of our obligations under existing enterprise search business contracts,
including customer support obligations. The transaction was structured as an
asset sale. The gain on the sale was $12.4 million. Verity acquired from us
the assets relating to our enterprise search software business, which includes
basic search, categorization and content refinement capabilities, as well as
our XML technology assets. Of the total consideration payable by Verity,
$22.0 million has been paid. $3.0 million plus interest
will be paid to us
18 months following the closing of the sale, subject to reduction for any
indemnification claims made by Verity during such 18 month period. The $3.0
million in contingent consideration has been excluded from the computation of
the gain on the transaction. The gain on the sale is recorded in Income from
Discontinued Operations in the Consolidated Statement of Operations.

The Enterprise Search division is accounted for as a discontinued
operation in accordance with Statement of Financial Accounting Standard (SFAS)
No. 144 Accounting for the Impairment or Disposal of Long-lived Assetsand
therefore, the results of operations and cash flows have been reclassified from
the Companys results of and cash flow from continuing operations for all
periods presented in this document. The Enterprise Search division was part of
the Companys Software Products reporting segment. The results of operations
for the Enterprise Search division have been excluded from the Segment
information footnote (see Note 11).

Summarized selected financial information for the discontinued operations
is as follows:

|                                           |  |                            |        |      |  |   |         |  
|------------------------------------------ |  | -------------------------- | ------ | ---- |  | - | ------- | -
|                                           |  | For the Three Months Ended
|                                           |  | December 31,              
|                                           |  |                           
|                                           |  | 2002                       |        | 2001
|                                           |  |                            |        |     
|Revenue                                    |  | $                          | 3,640  |      |  | $ | 5,934   |  
|Gross Profit                               |  |                            | 3,081  |      |  |   | 4,775   |  
|Operating Expenses                         |  |                            | 7,990  |      |  |   | 20,343  |  
|                                           |  |                            |        |      |  |   |         |  
|Net loss before income tax provision       |  |                            | (4,909 | )    |  |   | (15,568 | )
|Income tax provision                       |  |                            |       |      |  |   | (10     | )
|                                           |  |                            |        |      |  |   |         |  
|Net loss from discontinued operations      |  |                            | (4,909 | )    |  |   | (15,578 | )
|Gain on disposal                           |  |                            | 12,396 |      |  |   |        |  
|                                           |  |                            |        |      |  |   |         |  
|Income (loss) from discontinued operations |  | $                          | 7,487  |      |  | $ | (15,578 | )
|                                           |  |                            |        |      |  |   |         |  

The gain on disposal is calculated as follows:

|                                     |                                           |   |        |        |  
|------------------------------------ | ----------------------------------------- | - | ------ | ------ | -
|Proceeds from disposal               |                                           | $ | 22,000 |       
|Net assets and liabilities disposed: |                                           |   |        |       
|                                     | Accounts receivable, net                  |   |        | (2,445 | )
|                                     | Prepaid expenses and other current assets |   |        | (649   | )
|                                     | Property and equipment, net               |   |        | (237   | )
|                                     | Goodwill and other intangibles, net       |   |        | (9,896 | )
|                                     | Deferred revenue                          |   |        | 5,623  |  
|Disposal costs                       |                                           |   | (2,000 | )     
|                                     |                                           |   |        |       
|Gain on disposal                     |                                           | $ | 12,396 |       
|                                     |                                           |   |        |       

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Verity did not assume outstanding accrued liabilities as part of the
transaction. As of December 31, 2002, approximately $0.2 million of accrued
liabilities related to operating expenses of and disposal cost for the
Enterprise Search division.

Cash flow provided by discontinued operations were $17.2 million and $1.7
million for the quarter ended December 31, 2002 and 2001, respectively, and is
calculated as follows:

|                                                                                   |  |                            |        |      |  |   |         |  
|---------------------------------------------------------------------------------- |  | -------------------------- | ------ | ---- |  | - | ------- | -
|                                                                                   |  | For the Three Months Ended
|                                                                                   |  | December 31,              
|                                                                                   |  |                           
|                                                                                   |  | 2002                       |        | 2001
|                                                                                   |  |                            |        |     
|Net loss from discontinued operations                                              |  | $                          | (4,909 | )    |  | $ | (15,578 | )
|Amortization                                                                       |  |                            | 132    |      |  |   | 16,170  |  
|Change in assets and liabilities                                                   |  |                            | (40    | )    |  |   | 1,124   |  
|                                                                                   |  |                            |        |      |  |   |         |  
|Net cash provided from (used in)
operating activities from
discontinued operations |  |                            | (4,817 | )    |  |   | 1,716   |  
|Proceeds from disposal                                                             |  |                            | 22,000 |      |  |   |        |  
|                                                                                   |  |                            |        |      |  |   |         |  
|Net cash flow provided from
discontinued operations                                |  | $                          | 17,183 |      |  | $ | 1,716   |  
|                                                                                   |  |                            |        |      |  |   |         |  

In October and
November 2002, we announced certain restructuring
actions related to our discontinued Enterprise Search division. The Company
recorded a charge of $3.7 million, net of tax, in discontinued operations
associated with these restructurings in the three months ended December 31,
2002.

Note 3. Restructurings

Fiscal 2003 First Quarter Restructuring

For the quarter ended December 31, 2002, we accrued $18.9 million for
restructuring charges from continuing operations and $3.7 million from
discontinued operations. At December 31, 2002, $17.8 million for restructuring
remained outstanding as an accrued liability on our balance sheet of which
$10.9 million is included in long-term liabilities.

In October 2002, in light of continuing economic slowdown, we announced
and substantially completed a restructuring and workforce reduction of 24
employees from continuing operations to reduce our operating expenses to adjust
to lower revenue levels. 61 employees from discontinued operations were also
part of the workforce reduction. Headcount in all functional areas was
affected by the reduction.

In November 2002, in connection with the sale of our Enterprise Search
division, we announced a workforce reduction of 23 employees from continuing
operations. 35 employees from discontinued operations were also part of the
workforce reduction. This restructuring was completed in December 2002.
Headcount was affected in the areas of corporate and business services as well
as our Enterprise Search division.

As a result of the above restructurings, we incurred a charge of $18.9
million from continuing operations and $3.7 million from discontinued
operations comprised of cash-related severance and abandonment of underutilized
space. The charges for the abandonment of underutilized space included offices
in Chicago, New York, Virginia, Redwood City, San Francisco, San Diego and
international offices in Tokyo and London. These offices were closed as a
result of the reduction of employees at these locations and the Companys
decision to abandon the leases in this quarter.

Approximately $11.6 million of the charge relates to one facility in
Redwood City with a remaining lease term through June 2010. Lease abandonment
costs for this facility were estimated to include the

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

remaining lease liabilities through the term of the lease and brokerage fees
offset by estimated sublease income. Estimates related to sublease costs and
income are based on assumptions regarding the period required to locate
sub-lessees and sublease rates which were derived from market trend information
provided by commercial real estate brokers. These estimates will be reviewed on
a periodic basis and to the extent hat these assumptions materially change due
to changes in the market, the ultimate restructuring expense for the abandoned
facility could be adjusted.

Approximately $4.8 million of the above charges were paid in the quarter
ended December 31, 2002. Cash-related severance will be paid over the next six
months. The remaining lease obligations will be paid over the next seven
years.

The following table sets forth an analysis of the components of the fiscal
2003 first quarter restructuring charge and the payments made against the
accrual through December 31, 2002 (in thousands):

|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |        |        | 
|----------------------------------------------------- | -------------------- | ----------------------------------- | ----------------------------- | ----- | ----------------- | ----- | ------ | - | ------------- | ------ | ------ | ----- | ------ | ------ | 
|                                                      |                      |                                     |                               |       |                   |       |        |   | Underutilized |        |        |       |       
|                                                      |                      |                                     |                               |       | Severance Related |       | Space  |   | Total        
|                                                      |                      |                                     |                               |       |                   |       |        |   |              
|Restructuring provision from continuing
operations:   |                      |                                     |                               |       |                   |       |        |   |               |        |        |      
|                                                      | Severance related    |                                     | $                             | 2,534 |                   |       | $      |  |               |        | $      | 2,534 |       
|                                                      | Underutilized Space: |                                     |                               |       |                   |       |        |   |               |        |        |       |       
|                                                      |                      | Remaining lease obligations         |                               |       |                  |       |        |   | 19,723        |        |        |       | 19,723 |       
|                                                      |                      | Office closure and settlement costs |                               |       |                  |       |        |   | 2,763         |        |        |       | 2,763  |       
|                                                      |                      | Estimated sublease income           |                               |       |                  |       |        |   | (6,166        | )      |        |       | (6,166 | )     
|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |       
|                                                      |                      |                                     | Total continuing operations   |       |                   | 2,534 |        |   |               | 16,320 |        |       |        | 18,854 | 
|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |       
|Restructuring provision from
discontinued operations: |                      |                                     |                               |       |                   |       |        |   |               |        |        |      
|                                                      | Severance related    |                                     |                               | 3,730 |                   |       |        |  |               |        |        | 3,730 |       
|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |       
|                                                      |                      |                                     | Total discontinued operations |       |                   | 3,730 |        |   |               |       |        |       |        | 3,730  | 
|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |       
|Total                                                 |                      |                                     | 6,264                         |       |                   |       | 16,320 |   |               |        | 22,584 |      
|Cash paid                                             |                      |                                     | (4,514                        | )     |                   |       | (290   | ) |               |        | (4,804 | )    
|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |       
|Accrual balance at December 31, 2002                  |                      | $                                   | 1,750                         |       |                   | $     | 16,030 |   |               | $      | 17,780 |      
|                                                      |                      |                                     |                               |       |                   |       |        |   |               |        |        |       |       

Fiscal 2002 Fourth Quarter Restructuring

In July 2002, we announced plans to focus our business on Web search and
search software markets. As a result, we significantly scaled back the
content networking products group and related corporate infrastructure and
eliminated 286 positions from continuing operations and 4 positions from
discontinued operations and closed several sales offices around the world. As a
result of this restructuring, we incurred a charge of $15.3 million from
continuing operations and $0.1 million from discontinued operations, made up of
$11.9 million of severance and related expenses and $3.5 million in costs
associated primarily with the consolidation of sales offices in North America
and Europe. Approximately $2.9 million of the charge was paid in the quarter
ended December 31, 2002 and the remainder will be paid over the next nine
months.

The following table sets forth an analysis of the components of the fiscal
2002 fourth quarter restructuring charge and the payments made against the
accrual through December 31, 2002 (in thousands):

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |        |    | 
|----------------------------------------------------- | --------------------------- | --------------------------- | ----------------------------- | ------ | ----------------- | -- | ------ | ----- | ------------- | - | ------- | ------ | ------ | -- | 
|                                                      |                             |                             |                               |        |                   |    |        |       | Underutilized |   |         |        |       
|                                                      |                             |                             |                               |        | Severance Related |    | Space  |       | Total        
|                                                      |                             |                             |                               |        |                   |    |        |       |              
|Restructuring provision from
continuing operations:   |                             |                             |                               |        |                   |    |        |       |               |   |         |       
|                                                      | Severance related           |                             | $                             | 11,805 |                   |    | $      |      |               |   | $       | 11,805 |       
|                                                      | Committed excess facilities |                             |                               |       |                   |    |        | 3,535 |               |   |         | 3,535  |       
|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |       
|                                                      |                             | Total continuing operations |                               |        | 11,805            |    |        |       | 3,535         |   |         |        | 15,340 |   
|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |       
|Restructuring provision from
discontinued operations: |                             |                             |                               |        |                   |    |        |       |               |   |         |       
|                                                      | Severance related           |                             |                               | 69     |                   |    |        |      |               |   |         | 69     |       
|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |       
|                                                      |                             |                             | Total discontinued operations |        |                   | 69 |        |       |               |  |         |        |        | 69 | 
|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |       
|Total                                                 |                             |                             | 11,874                        |        |                   |    | 3,535  |       |               |   | 15,409  |       
|Cash paid                                             |                             |                             | (10,080                       | )      |                   |    | (1,133 | )     |               |   | (11,213 | )     
|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |       
|Accrual balance at December 31, 2002                  |                             | $                           | 1,794                         |        |                   | $  | 2,397  |       |               | $ | 4,196   |       
|                                                      |                             |                             |                               |        |                   |    |        |       |               |   |         |        |       

Fiscal 2002 Third Quarter Restructuring

In April 2002, we completed a restructuring and a workforce reduction of
approximately 43 employees from continuing operations and 7 employees from
discontinued operations to reduce our operating expenses. All of our functional
areas were affected by the reduction. As a result of this workforce reduction,
we incurred a charge of $2.0 million from continuing operations and $0.3
million from discontinued operations. We recorded a reduction to the fiscal
2002 third quarter restructuring provision of $0.3 million in the fourth
quarter of fiscal 2002, as actual costs for severance and benefits were lower
than originally anticipated. Approximately $78,000 of the charge was paid in
the quarter ended December 31, 2002 and the remainder will be paid over the
next twelve months.

The following table sets forth an analysis of the components of the fiscal
2002 third quarter restructuring charge and the payments made against the
accrual through December 31, 2002 (in thousands):

|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |       |     | 
|----------------------------------------------------- | --------------------------- | --------------------------- | ----------------------------- | ----- | ----------------- | --- | ----- | --- | ------------- | - | ------ | ----- | ----- | --- | 
|                                                      |                             |                             |                               |       |                   |     |       |     | Underutilized |   |        |       |      
|                                                      |                             |                             |                               |       | Severance Related |     | Space |     | Total        
|                                                      |                             |                             |                               |       |                   |     |       |     |              
|Restructuring provision from continuing operations:   |                             |                             |                               |       |                   |     |       |     |               |   |        |      
|                                                      | Severance related           |                             | $                             | 1,692 |                   |     | $     |    |               |   | $      | 1,692 |      
|                                                      | Committed excess facilities |                             |                               |      |                   |     |       | 268 |               |   |        | 268   |      
|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |      
|                                                      |                             | Total continuing operations |                               |       | 1,692             |     |       |     | 268           |   |        |       | 1,960 |    
|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |      
|Restructuring provision from discontinued operations: |                             |                             |                               |       |                   |     |       |     |               |   |        |      
|                                                      | Severance related           |                             |                               | 260   |                   |     |       |    |               |   |        | 260   |      
|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |      
|                                                      |                             |                             | Total discontinued operations |       |                   | 260 |       |     |               |  |        |       |       | 260 | 
|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |      
|Total                                                 |                             |                             | 1,952                         |       |                   |     | 268   |     |               |   | 2,220  |      
|Cash paid                                             |                             |                             | (1,638                        | )     |                   |     | (100  | )   |               |   | (1,738 | )    
|Release of excess accrual                             |                             |                             | (273                          | )     |                   |     |      |     |               |   | (273   | )    
|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |      
|Accrual balance at December 31, 2002                  |                             | $                           | 41                            |       |                   | $   | 168   |     |               | $ | 209    |      
|                                                      |                             |                             |                               |       |                   |     |       |     |               |   |        |       |      

Fiscal 2001 Fourth Quarter Restructuring

In the quarter ended September 30, 2001, we instituted a restructuring and
a workforce reduction of approximately 33 employees to reduce our operating
expenses. The reduction in workforce primarily affected our employees working
on wireless related products, which is part of our content networking products
group. As a result of this restructuring, we incurred a charge of
approximately $6.5 million from continuing operations and $40,000 from
discontinued operations in the quarter ended September 30, 2001.

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

We recorded a reduction to the fiscal 2001 fourth quarter restructuring
provision of $0.2 million in the fourth quarter of fiscal 2002, as actual costs
for under utilized space were lower than originally anticipated. This charge
included costs associated with underutilized space and office consolidations
related primarily to approximately eight sales offices in North America and the
United Kingdom. Approximately $32,000 of the charge was paid in the quarter
ended December 31, 2002 and the remainder will be paid over the next 24 months.

The following table sets forth an analysis of the components of the fiscal
2001 fourth quarter restructuring charge and the payments made against the
accrual through December 31, 2002 (in thousands):

|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |       |       |    | 
|----------------------------------------------------- | --------------------------- | --------------------------- | ----------------------------- | ----- | ----------------- | -- | ------------------- | ----- | ----- | - | ------ | ----- | ----- | -- | 
|                                                      |                             |                             |                               |       | Severance Related |    | Underutilized Space |       | Total
|                                                      |                             |                             |                               |       |                   |    |                     |       |      
|Restructuring provision from continuing operations:   |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|                                                      | Severance related           |                             | $                             | 2,161 |                   |    | $                   |      |       |   | $      | 2,161 |      
|                                                      | Committed excess facilities |                             |                               |      |                   |    |                     | 4,375 |       |   |        | 4,375 |      
|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|                                                      |                             | Total continuing operations |                               |       | 2,161             |    |                     |       | 4,375 |   |        |       | 6,536 |   
|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|Restructuring provision from discontinued
operations: |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|                                                      | Severance related           |                             |                               | 40    |                   |    |                     |      |       |   |        | 40    |      
|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|                                                      |                             |                             | Total discontinued operations |       |                   | 40 |                     |       |       |  |        |       |       | 40 | 
|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|Total                                                 |                             |                             | 2,201                         |       |                   |    | 4,375               |       |       |   | 6,576  |      
|Cash paid                                             |                             |                             | (2,201                        | )     |                   |    | 3,096               | )     |       |   | (5,297 | )    
|Release of excess accrual                             |                             |                             |                              |       |                   |    | (200                | )     |       |   | (200   | )    
|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |      
|Accrual balance at December 31, 2002                  |                             | $                           |                              |       |                   | $  | 1,079               |       |       | $ | 1,079  |      
|                                                      |                             |                             |                               |       |                   |    |                     |       |       |   |        |      

Note 4. Impairment of Fixed Assets and Loss on Asset Sale

During the quarter ended December 31, 2002, we incurred $1.9 million of
asset impairment charges as a result of our restructurings (see Note 3). The
downsizing in our field offices resulted in the abandonment of fixed assets.
The $1.9 million write-down represents $0.1 million of computer equipment,
$0.3 million of abandoned assets, primarily computer equipment and furniture
and fixtures, and leasehold improvements from our Tokyo office, $0.8 million of
abandoned assets, primarily computer equipment and furniture and fixtures, and
leasehold improvements from our London office and $0.7 million of abandoned
furniture and fixtures and leasehold improvements from various offices in the
U.S.

In August 2000, we entered into an operating lease agreement for the land
and facilities of our corporate headquarters, known as Bayside, in Foster City,
California. This operating lease was commonly referred to as a synthetic lease
because it represents a form of off-balance sheet financing under which an
unrelated third-party funds 100% of the costs of the acquisition of the
property and leases the asset to Inktomi as lessee. Under the lease terms, we
were required to pay lease payments for five years to the lessor. The payments
were calculated based on a floating interest rate applied against a $114
million principal value.

In August 2002, through the execution of a Termination and Release
Agreement, we exercised the purchase option under our operating lease
arrangement for the Bayside corporate headquarters. Title for such facilities
was transferred to Inktomi on such date. We paid $114.0 million to Deutsche
Bank and its affiliates, the holders of the synthetic lease, for the purchase
of the Bayside corporate headquarters. At the purchase date we valued the
Bayside corporate headquarters at $44.8 million based on established valuation
techniques.

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

On December 20, 2002, we completed the sale of our Bayside corporate
headquarters for $41.6 million which resulted in a loss of $3.4 million. We
also entered into a five-year lease with the facilities new owner for the
portion of the property that we occupy for an aggregate lease commitment of
$9.8 million net of costs.

Note 5. Calculation of Net Loss per Share

Shares of Common Stock used in computing basic and diluted net loss per
share (EPS) are based on the weighted average shares of Common Stock
outstanding in each period. Basic net loss per share is calculated by dividing
net loss by the average number of outstanding shares of Common Stock during the
period. Diluted net loss per share is calculated by adjusting the average
number of outstanding shares of Common Stock assuming conversion of all
potentially dilutive stock options and warrants under the treasury stock
method. Excluded from the computation of diluted earnings per share for the
quarter ended December 31, 2002 and December 31, 2001 are options to acquire
4.7 million and 26.5 million shares of Common Stock, respectively as their
effects would be anti-dilutive.

Note 6. Commitment and Contingencies

On August 2, 2001, an amended complaint was filed by Network Caching
Technology, L.L.C. in the United States District Court for the Northern
District of California against Inktomi as well as other providers of caching
technologies including Novell, Inc., Akamai Technologies, Inc., Volera, Inc.,
and Cacheflow, Inc. Plaintiff alleges that certain products marketed by Inktomi
and the other defendants violate one or more patents owned by plaintiff. The
complaint seeks compensatory and other damages and injunctive relief. We were
served the complaint on August 7, 2001. We subsequently filed a response
denying the allegations and asserting a number of defenses. At this time it is
too early to estimate any potential losses from this action and whether this
action may have a material impact on the results of operations. We are
vigorously defending against this action.

In October 2002, a complaint was served by Teknowledge Corporation in the
United States District Court for Delaware against Inktomi, Akamai Technologies,
Inc. and Cable & Wireless Services, Inc. The plaintiff alleges that Inktomi
products, including Traffic Server, infringe a patent owned by the plaintiff.
The complaint seeks compensatory and other damages and injunctive relief. In
November 2002, the Judge assigned to the case in Delaware transferred
jurisdiction of the case to the Northern District of California. Inktomi
intends to vigorously defend the allegations made by the plaintiff.

From time to time, we are also involved in other legal actions arising in
the ordinary course of business. We have incurred certain amounts associated
with defending these matters. There can be no assurance the Network Caching,
Teknowledge or other third party assertions will be resolved without costly
litigation, in a manner that is not adverse to our financial position, results
of operations or cash flows or without requiring royalty payments in the future
which may adversely impact gross margins. No estimate can be made of the
possible loss or possible range of loss associated with the resolution of these
contingencies. As a result, no losses have been accrued in our financial
statements as of December 31, 2002.

Litigation Related to the Yahoo! Merger

Persons alleging to be shareholders of Inktomi have filed three lawsuits
relating to our pending merger with a wholly-owned subsidiary of
Yahoo!. On January 22, 2003, an alleged holder of Inktomi
common stock filed a purported derivative and class action lawsuit captioned
Tuttle v. Myers, et al., Case No. CIV 428695, in California Superior Court for
the County of San Mateo. The complaint names as defendants each of our five
directors and names Inktomi as a nominal defendant. The complaint alleges that,
in pursuing the transaction with Yahoo! and approving the merger agreement, the
directors breached their fiduciary duties to the holders of Inktomi common
stock and Inktomi by, among other things, engaging in self-dealing, abusing
control of the company, failing to obtain the highest price reasonably
available for Inktomi and its shareholders, committing waste of corporate
assets and failing to properly value Inktomi. The complaint further alleges
that the merger agreement resulted from a flawed process and that the directors
tailored the terms of the merger to meet the needs of two directors. The
complaint also alleges that Inktomi directly breached and/or aided and abetted
the directors alleged breaches of fiduciary duties. The complaint seeks, among
other things, certification of the litigation as a class action, a declaration
that the merger agreement was entered into in breach of the directors
fiduciary duties, a preliminary and permanent injunction enjoining Inktomi, the
directors and others from consummating the merger, a direction requiring that
the directors exercise their fiduciary duties to obtain a transaction which is
in the best interests of the Inktomi shareholders, rescission of the merger or
any of the terms thereof to the extent implemented, an award of costs,
including attorneys and experts fees, and other unspecified relief.

On January 24, 2003, an alleged holder of Inktomi common stock filed a
purported class action lawsuit captioned Malachinski v. Peterschmidt, et al.,
Case No. CIV 428824, in the California Superior Court for the County of San
Mateo. On January 29, 2003 an alleged holder of Inktomi common stock filed a
purported class action lawsuit captioned Zakary v. Peterschmidt, et al., Case
No. CIV 428898, in the same Superior Court. The complaint in the Zakary action
is substantially identical to the complaint in the Malachinski action. Both
complaints name as defendants three of our five current directors, two of our
former directors and Inktomi.

The complaints in the Malachinski and Zakary actions allege that our
directors breached their fiduciary duties in connection with the proposed
acquisition by Yahoo! by, among other things, approving a transaction in which
they allegedly stand to receive financial benefits not shared by the other
Inktomi shareholders, retaining a financial advisor (Thomas Weisel Partners)
that has business ties to Yahoo!, failing to obtain the best offer possible for
Inktomis shareholders, agreeing to the termination fee provisions of the
merger agreement, failing to adequately value Inktomi, and failing to make
complete and adequate disclosure of alleged material facts regarding the
transaction and the events that preceded the execution of the merger agreement.
The plaintiffs seek, among other things, certification of their respective
actions as class actions, a declaration that the directors have breached their
fiduciary duties, an order requiring the defendants to indemnify the
shareholders for the alleged breaches of fiduciary duty, an injunction
enjoining the merger or rescinding it, if consummated, an order requiring
defendants to make additional disclosures, an award of compensatory and/or
rescissory damages, an award of interest, attorneys fees, expert fees and
other costs, and other unspecified relief.

On January 29, 2003, the plaintiff in the Malachinski action filed a
motion for expedited discovery and an order temporarily enjoining the merger.
On January 30, 2003, the Malachinski action was removed from the Superior Court
to the United States District Court for the Northern District of California. On
January 31, 2003, the Zakary action was removed from the Superior Court to the
same District Court. We filed motions to dismiss the Malachinski and Zakary
actions on February 5, 2003 and February 6, 2003, respectively.

Based on its review of the three complaints, Inktomi believes that the
allegations in the Tuttle, Malachinski and Zakary actions are without merit and
intends, along with the directors, to defend the actions vigorously. In the
event that holders of a majority of the outstanding shares of Inktomi common
stock vote in favor of adoption of the merger agreement, in addition to any
other defenses Inktomi and the directors may assert, Inktomi and the directors
intend to rely upon the approval of the proposal to adopt the merger agreement
in defense of the claims asserted in the actions. Specifically, Inktomi and the
directors intend to argue that the approval of the proposal to adopt the merger
agreement by holders of a majority of the shares of our common stock
constitutes a ratification or acceptance of the conduct that is the subject of
plaintiffs complaints. Inktomi and the directors further intend to argue that
such ratification or approval constitutes a complete defense to the claims
asserted in the complaints or otherwise operates to protect them from liability
or increase the plaintiffs burdens of pleading and proof in the actions.

At December 31, 2002, our notes payable of $2.4 million consisted of an
equipment loan collateralized by the underlying equipment. We have a line of
credit based on the current accounts receivable balances. At December 31,
2002, we had not drawn any amounts against this line of credit. Our bank loans
are subject to specific financial covenants that are reported to the bank
monthly. The covenants (i) require minimum unrestricted cash, cash equivalents
and short term investments of $27.5 million, (ii) provide that we cannot incur
GAAP loss of more than $10.3 million, $7.6 million, $4.7 million, $1.3 million
for the quarters ended December 31, 2002, March 31, 2003, June 30, 2003 and
September 30, 2003 respectively, (iii) require that we maintain all US bank
deposits at the bank, and (iv) require that we maintain at least
$25.0 million of tangible net worth.

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Any one or more of the following events would constitute a default under
the bank facility: payment default, covenant default, the occurrence of a
material adverse change, default under certain other agreements, subordinated
debt and judgments, misrepresentations regarding information we have disclosed
to the bank, and insolvency. Upon the occurrence of a default the bank may
declare all obligations due and payable immediately, settle or adjust disputes
and claims directly with account debtors for amounts that the bank considers
advisable, make such payments as necessary to protect its security interest in
the collateral, apply company balances held by the bank to the obligations, and
sell the collateral.

We violated the minimum cash balance covenants for the months ending
October and November 2002. The bank waived the covenant violations in December
2002. In December 2002, the bank waived the GAAP loss covenant for the quarter
ended December 31, 2002. We violated the tangible net worth
covenant for December 2002 and January 2003 and received a waiver
from the bank. The bank also prospectively waived the tangible net
worth covenant for February 2003.

We have entered into non-cancelable operating leases for office space and
equipment with original terms ranging from six months to 10 years. The future
minimum lease payments under non-cancelable operating leases, and the future
lease and sublease income under non-cancelable lease and sublease agreements at
December 31, 2002 are as follows (in thousands):

|                             |                                       |   |           |       |                  |   |       |     | 
|---------------------------- | ------------------------------------- | - | --------- | ----- | ---------------- | - | ----- | --- | 
|                             |                                       |   | Operating |       | Lease & Sublease
|                             |                                       |   | Leases    |       | Income          
|                             |                                       |   |           |       |                 
|                             | Nine months ending September 30, 2003 |   | $         | 6,131 |                  |   | $     | 965 | 
|                             | Year ending September 30, 2004        |   |           | 5,749 |                  |   |       | 114 | 
|                             | Year ending September 30, 2005        |   |           | 4,821 |                  |   |       |    | 
|                             | Year ending September 30, 2006        |   |           | 3,892 |                  |   |       |    | 
|                             | Year ending September 30, 2007        |   |           | 3,939 |                  |   |       |    | 
|Thereafter                   |                                       |   | 6,281     |       |                  |   |      |    
|                             |                                       |   |           |       |                  |   |       |    
|Total minimum lease payments |                                       | $ | 30,813    |       |                  | $ | 1,079 |    
|                             |                                       |   |           |       |                  |   |       |    

Our corporate headquarters consist of approximately 130,000 square feet of
office space in Foster City, California. In December 2002, we sold the property
and leased back the portion we now occupy. The lease is for a period of five
years renewable at our election for three successive five year periods. The
lease may also be terminated at our election after two years in exchange for a
fee. Aggregate payments to be made under the lease are approximately $9.8
million, net of costs, over the lease term ending December 19, 2007.

At September 30, 2002, we had a note resulting from the lease termination
agreement with the landlords of our Parkside facilities. From the note
inception to January 21, 2003, we applied an imputed annual interest rate of
6%. The loan was payable $5.0 million on or before October 1, 2002 and the
remainder earlier of (i) January 21, 2003 or (ii) the date of the sale of the
Bayside facility. On October 1, 2002, we paid the initial amount due of $5.0
million and on December 20, 2002, we paid the remaining $16.5 million upon the
close of the Bayside facility. This loan was collateralized by our Bayside
corporate headquarters facility.

Note 7. Related Party Transactions

In December 2001, our Board of Directors approved a $5 million revolving
line of credit to our Chief
Executive Officer. As of December 31, 2002, total loans outstanding and total
accrued interest to our Chief Executive Officer were approximately $4.9 million
and $234,000, respectively. During the quarter ended December 31, 2002,
interest of $74,000 was accrued. These loans are unsecured and are represented
by full recourse promissory notes accruing interest at the rate of 6% per
annum. Each loan, plus any accrued unpaid interest, will become due the earlier
of either two years from the grant date of the individual loan or the date that
our Chief Executive Officer leaves the Company. All after tax proceeds of
compensatory

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

bonuses and 50% of after tax proceeds from sales of Company stock must be used
to pay down the loans outstanding. The first loans will become due in December
2003.

In January 2001, we provided a relocation loan to a management employee
totaling $900,000. This notes bears interest at 5.61% per annum and is
collateralized by a deed of trust in the employees residence. The loan is due
December 2003. The employee left the Company in August 2001. During the quarter
ended September 30, 2002, the Company accrued a valuation allowance of $200,000
against the loan based on an estimate of the current value of the collateral.

We held investments in equity securities in certain customers at December
31, 2002. These customers comprised $40,000 and $0.8 million of revenue during
the quarters ended December 31, 2002 and 2001 respectively. These customers
did not have any accounts receivable balances as of December 31, 2002.

Note 8. Comprehensive Net Loss

Comprehensive loss includes foreign currency translation gains and losses
and unrealized gains and losses on debt and equity securities that have been
excluded from net loss and reflected instead in stockholders equity. The
components of comprehensive loss are as follows (in thousands):

|                                                                                                          |  |                            |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | ---- |  | - | ------- | -
|                                                                                                          |  | For the Three Months Ended
|                                                                                                          |  | December 31,              
|                                                                                                          |  |                           
|                                                                                                          |  | 2002                       |         | 2001
|                                                                                                          |  |                            |         |     
|Net loss                                                                                                  |  | $                          | (16,952 | )    |  | $ | (29,441 | )
|Unrealized gain on
available-for-sale securities, net
of reclassification adjustment
included in net loss |  |                            | 189     |      |  |   | 61      |  
|Foreign currency translation gain                                                                         |  |                            | 152     |      |  |   | 1,037   |  
|                                                                                                          |  |                            |         |      |  |   |         |  
|Comprehensive net loss                                                                                    |  | $                          | (16,611 | )    |  | $ | (28,343 | )
|                                                                                                          |  |                            |         |      |  |   |         |  

Note 9. Stock Option Exchange Program

In February 2001, the Inktomi Board of Directors approved a stock option
exchange program. Under this program, all employees (including executive
officers and outside directors) were given the opportunity to cancel one or
more stock options previously granted to them in exchange for one or more new
stock options to be granted at least six months and one day from the date the
old options are cancelled, provided the individual is still employed or
providing service on such date. The participation deadline for the program was
February 28, 2001. The number of shares subject to the new options were equal
to the number of shares subject to the old options, and the exercise price of
the new options was the fair market value of Inktomi Common Stock on the date
they were granted. The new options have the same vesting schedule as the old
options and are immediately exercisable as to vested shares when granted
(however, new options granted to executive officers and outside directors lost
three months of vesting and were subject to a trading blackout of three months
following the grant). The exchange resulted in the voluntary cancellation of
options to purchase approximately 12.8 million shares of Common Stock with
exercise prices ranging from $12.25 to $211.00 per share. Approximately 10.6
million replacement options were granted on August 29, 2001, of which 4.1
million shares are outstanding as of December 31, 2002, at an exercise price of
$4.21 per share of Common Stock. Accordingly, the 10.6 million replacement
options that were granted outside the six month period following the
implementation of the option exchange program, were subject to fixed plan
accounting.

Stock options granted during the six month period prior to implementation
of the option exchange program that were not cancelled as part of the program
are subject to variable plan accounting beginning in the fiscal quarter ended
March 31, 2001. During the six months prior to implementation of the program,
Inktomi granted approximately 2.8 million options, of which 0.6 million are
outstanding as of December

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

31, 2002, at an average price of $17.90 per option, that are subject to
variable plan accounting. Also subject to variable plan accounting are 1.4
million options, of which 0.4 million shares are outstanding as of December 31,
2002, at an average price of $7.18 per option, that were granted to
participants of the program during the six months following implementation of
the program. These options are subject to variable plan accounting. Under
variable plan accounting, we are required to record a non-cash compensation
charge for the options until the options are exercised, forfeited or cancelled
without replacement. The compensation charge will be based on any excess of the
closing stock price at the end of the reporting period or date of exercise,
forfeiture or cancellation without replacement, if earlier, over the fair
market value of our Common Stock on the options issuance date. The resulting
compensation charge to earnings will be recorded as the underlying options
vest. Depending upon movements in the market value of our Common Stock, this
accounting treatment may result in significant compensation charges in future
periods. As of December 31, 2002, we have recorded no compensation charges
related to this program.

Note 10. Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS 142, Goodwill and Other Intangible Assets, which is effective for fiscal
years beginning after December 15, 2001. SFAS 142 requires, among other things,
the discontinuance of goodwill amortization. In addition, the standard includes
provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the testing for impairment of existing
goodwill and other intangibles. The impairment review required under SFAS 142
will involve a two-step process as follows:



| |  |  | Step 1  we will compare the fair value of our reporting units to
the carrying value, including goodwill of each of those units. For each
reporting unit where the carrying value, including goodwill, exceeds
the units fair value, we will move on to step 2. If a units fair
value exceeds the carrying value, no further work is performed and no
impairment charge is necessary.                                                                                                                                                                
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Step 2  we will perform an allocation of the fair value of the
reporting unit to its identifiable tangible and non-goodwill intangible
assets and liabilities. This will derive an implied fair value for the
reporting units goodwill. We will then compare the implied fair value
of the reporting units goodwill with the carrying amount of the
reporting units goodwill. If the carrying amount of the reporting
units goodwill is greater than the implied fair value of its goodwill,
an impairment loss must be recognized for the excess.

We adopted SFAS 142 as of October 1, 2002. Upon implementation we
allocated the goodwill associated with the Quiver acquisition to a reporting
unit consisting of the Enterprise Search division. We further concluded that
since the fair value of the Enterprise Search division exceeded the carrying
value, including the Goodwill from the Quiver acquisition there was no further
need for an impairment assessment. As of December 31, 2002 no goodwill remains
on the balance sheet.

The following table presents the quarters ended December 31, 2002 and 2001
results of operations reformatted to exclude goodwill amortization. These
adjusted results are presented as required by SFAS 142 to allow a comparison
between actual results and the adjusted results. The first table includes
income from continuing operations and earnings per share from continuing
operations. The second table presents the same data for the total company
including both continuing operations and discontinued operations:
-15-Table of ContentsINKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

|                                                                 |  |                            |         |      |  |   |         |  
|---------------------------------------------------------------- |  | -------------------------- | ------- | ---- |  | - | ------- | -
|                                                                 |  | For the Three Months Ended
|Continued Operations Only                                        |  | December 31,              
|                                                                 |  |                           
|                                                                 |  | 2002                       |         | 2001
|                                                                 |  |                            |         |     
|Net loss from continuing operations:                             |  |                            |         |      |  |   |         |  
|Reported net loss from continuing operations                     |  | $                          | (24,439 | )    |  | $ | (13,863 | )
|Add: Goodwill amortization                                       |  |                            |        |      |  |   | 539     |  
|Adjusted net loss from continuing operations                     |  | $                          | (24,439 | )    |  | $ | (13,324 | )
|Basic and diluted net loss per share from continuing operations: |  |                            |         |      |  |   |         |  
|Reported net loss from continuing operations                     |  | $                          | (0.15   | )    |  | $ | (0.10   | )
|Add: Goodwill amortization                                       |  |                            |        |      |  |   |        |  
|Adjusted net loss from continuing operations                     |  | $                          | (0.15   | )    |  | $ | (0.10   | )
|Weighted average shares outstanding used in per share            |  |                            |         |      |  |   |         |  
|calculation                                                      |  |                            | 162,284 |      |  |   | 136,660 |  

|                                                                 |  |                            |         |      |  |   |         |  
|---------------------------------------------------------------- |  | -------------------------- | ------- | ---- |  | - | ------- | -
|                                                                 |  | For the Three Months Ended
|Continued and Discontinued Operations                            |  | December 31,              
|                                                                 |  |                           
|                                                                 |  | 2002                       |         | 2001
|                                                                 |  |                            |         |     
|Net loss:                                                        |  |                            |         |      |  |   |         |  
|Reported net loss                                                |  | $                          | (16,952 | )    |  | $ | (29,441 | )
|Add: Goodwill amortization                                       |  |                            |        |      |  |   | 16,709  |  
|Adjusted net loss                                                |  | $                          | (16,952 | )    |  | $ | (12,732 | )
|Basic and diluted net loss per share from continuing operations: |  |                            |         |      |  |   |         |  
|Reported net loss                                                |  | $                          | (0.10   | )    |  | $ | (0.22   | )
|Add: Goodwill amortization                                       |  |                            |        |      |  |   | 0.12    |  
|Adjusted net loss                                                |  | $                          | (0.10   | )    |  | $ | (0.09   | )
|Weighted average shares outstanding used in per share            |  |                            |         |      |  |   |         |  
|calculation                                                      |  |                            | 162,284 |      |  |   | 136,660 |  

In October 2001, the FASB issued SFAS 144, Accounting for the Impairment
or Disposal of Long-lived Assets. The objectives of SFAS 144 are to address
significant issues relating to the implementation of SFAS 121, Accounting for
the Impairment of Long-lived Assets to be Disposed of, and to develop a single
accounting model, based on the framework established by SFAS 121, for
long-lived assets to be disposed of by sale, whether previously held and used
or newly acquired. Additionally, SFAS 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from
the ongoing operations of the entity in a disposal transaction. Although SFAS
144 supercedes SFAS 121, it retains some fundamental provisions of SFAS 121.
SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. We implemented SFAS 144 during the quarter ended December 31, 2002. In
accordance with the provisions of SFAS 144 we accounted for the sale of our
Enterprise Search division as discontinued operations presenting the effect of
the enterprise search division separately in the statements of operations and
cash flow (see Note 2). Other than this, the implementation of SFAS 144 did
not have a material effect on our financial statement.

In June 2002, the FASB issued SFAS 146, Accounting for Exit or Disposal
Activities. SFAS 146
addresses significant issues regarding the recognition, measurement, and
reporting of costs that are associated with exit and disposal activities,
including restructuring activities that are currently accounted for under
Emerging Issues Task Force (EITF) No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). The scope of SFAS 146
also includes costs related to terminating a contract that is not a capital
lease and termination benefits that employees who are involuntarily terminated
receive under the terms of a one-time benefit arrangement that is not an
ongoing benefit arrangement or an individual

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

deferred-compensation contract. SFAS 146 will be effective for exit or disposal
activities that are initiated after December 31, 2002 and early application is
encouraged. The provisions of EITF No. 94-3 shall continue to apply for an exit
activity initiated under an exit plan that met the criteria of EITF No. 94-3
prior to the adoption of SFAS 146. We will adopt FSAS 146 for exit or disposal
activities that are initiated after December 31, 2002. The effect on adoption
of SFAS 146 will change on a prospective basis the timing of when restructuring
charges are recorded from a commitment date approach to when the liability is
incurred.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.FIN 45 requires that upon issuance of a guarantee, the
guarantor must recognize a liability for the fair value of the obligation it
assumes under that guarantee. The disclosure provisions of FIN 45 were adopted
by the Company in the three months period ended December 31, 2002. The
provisions for initial recognition and measurement are effective on a
prospective basis for guarantees that are issued or modified after December 31,
2002, irrespective of a guarantors year-end. We are currently assessing what
the impact of the guidance would be on our financial statements.

In November 2002, the EITF reached a consensus on issue No. 00-21
Accounting for Revenue Arrangements with Multiple Deliverables(EITF 00-21)
on a model to be used to determine when a revenue arrangement with multiple
deliverables should be divided into separate units of accounting and, if
separation is appropriate, how the arrangement consideration should be
allocated to the identified accounting units. The EITF also reached a consensus
that this guidance should be effective for all revenue arrangements entered
into in fiscal periods beginning after June 15, 2003, which for the company
would result in an adoption in the quarter ending September 30, 2003. We are
currently assessing what the impact of the guidance would be on our financial
statements.

In December 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 148, Accounting for Stock-Based Compensation,
Transition and Disclosure. SFAS 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. SFAS 148 also requires that disclosures of
the pro forma effect of using the fair value method of accounting for
stock-based employee compensation be displayed more prominently and in a
tabular format. Additionally, SFAS 148 requires disclosure of the pro forma
effect in interim financial statements. The transition and annual disclosure
requirements of SFAS 148 are effective for fiscal years ended after December
15, 2002. The interim disclosure requirements are effective for interim
periods beginning after December 15, 2002. The company will implement the
interim disclosure provisions of SFAS 148 in the three months ending March 31,
2003. Except for the disclosure of the pro forma effect using the fair value
method on an interim basis the company believes that the adoption of this
standard will have no material impact on its financial statements.

Note 11. Segment and Geographic Information

Effective September 30, 1999, we adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 established
standards for reporting information about operating segments in annual
financial statements and requires selected information about operating segments
in interim financial reports issued to stockholders. It also established
standards for related disclosures about products and services, and geographic
areas. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly
by the chief operating decision maker, or decision making group, in deciding
how to allocate resources and in assessing performance. Our chief operating
decision-maker is our Chief Executive Officer. Our reportable segments are
organized primarily by technology. Each of these segments is managed separately
because they offer and distribute distinct technologies and services with
different methods of delivery and customer bases.

We have two reportable operating segments: Software Products and Portal
Services. Software Products revenues are composed of license, consulting,
support and upgrade fees in connection with the Traffic Server network cache
platform and its associated product family, Content Delivery Suite software
-17-Table of ContentsINKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)solutions, Media Products, Traffic Core, Traffic Edge, Traffic Controller
and Inktomi Media Publisher. Portal Services revenues are composed of revenues
generated through our Web search services.As described in note 2 on December 17, 2002 we completed the sale of our
Enterprise Search division. The results of operations from the Enterprise
search division have been reclassified as discontinued operations for the
quarters ended December 31, 2002 and December 31, 2001. Enterprise search used
to be part of our Software products segment. As a result of the discontinuance,
the results of our Enterprise search division have been reclassified out of the
result of our Software Products segment.We evaluate performance and allocate resources to our operating segments
based on a variety of factors, including revenues, operating profit, market
potential, customer commitments and strategic direction.Amortization of intangibles and other assets, impairment of intangibles
and other assets, impairment of fixed assets, restructuring, and amortization
of deferred compensation expense are not included in managements evaluation of
performance by the operating divisions, as they are primarily organizational in
nature. The accounting policies of the reportable segments are the same as
those described in Note 1.Operating results about segments (in thousands):

|                        |  |                                              |       |          |  |               |       |                 |  |              |         |       |  |            |        |           |  |   |      |   |  |   |         |  
|----------------------- |  | -------------------------------------------- | ----- | -------- |  | ------------- | ----- | --------------- |  | ------------ | ------- | ----- |  | ---------- | ------ | --------- |  | - | ---- | - |  | - | ------- | -
|                        |  | For the Three Months Ended December 31, 2002
|                        |  |                                             
|                        |  |                                              |       |          |  |               |       |                 |  |              |         |       |  | Impairment |        |           |  |   |      |   |  |  
|                        |  |                                              |       |          |  |               |       |                 |  |              |         |       |  | of Fixed   |        | Amort. of |  |   |      |  
|                        |  | Portal                                       |       | Software |  | Restructuring |       | Assets and Loss |  | Deferred     |         |       |  |           
|                        |  | Services                                     |       | Products |  | Charges       |       | on Asset Sale   |  | Compensation |         | Total
|                        |  |                                              |       |          |  |               |       |                 |  |              |         |      
|Revenues                |  | $                                            | 9,975 |          |  | $             | 3,880 |                 |  | $            |        |       |  | $          |       |           |  | $ |     |   |  | $ | 13,855  |  
|Operating income
(loss) |  | $                                            | (565  | )        |  | $             | (912  | )               |  | $            | (18,854 | )     |  | $          | (5,358 | )         |  | $ | (136 | ) |  | $ | (25,825 | )

|                        |  |                                              |        |                   |  |              |         |         |  |                     |        |               |  |                 |        |          |  |            |        |   |  |   |        |   |  |   |         |  
|----------------------- |  | -------------------------------------------- | ------ | ----------------- |  | ------------ | ------- | ------- |  | ------------------- | ------ | ------------- |  | --------------- | ------ | -------- |  | ---------- | ------ | - |  | - | ------ | - |  | - | ------- | -
|                        |  | For the Three Months Ended December 31, 2001
|                        |  |                                             
|                        |  |                                              |        |                   |  |              |         |         |  |                     |        |               |  |                 |        |          |  | Impairment |        |   |  |   |        |   |  |  
|                        |  |                                              |        |                   |  |              |         |         |  | Amort. & Impairment |        |               |  |                 |        | of Fixed |  | Amort. of  |        |   |  |  
|                        |  |                                              |        |                   |  |              |         |         |  | of Intangibles &    |        | Restructuring |  | Assets and Loss |        | Deferred |  |            |        |  
|                        |  | Portal Services                              |        | Software Products |  | Other Assets |         | Charges |  | on Asset Sale       |        | Compensation  |  | Total          
|                        |  |                                              |        |                   |  |              |         |         |  |                     |        |               |  |                
|Revenues                |  | $                                            | 10,628 |                   |  | $            | 22,422  |         |  | $                   |       |               |  | $               |       |          |  | $          |       |   |  | $ |       |   |  | $ | 33,050  |  
|Operating income
(loss) |  | $                                            | 2,231  |                   |  | $            | (11,063 | )       |  | $                   | (2,289 | )             |  | $               | (2,638 | )        |  | $          | (1,300 | ) |  | $ | (1,978 | ) |  | $ | (17,037 | )

Total assets by segments at December 31, 2002 (in thousands):

|             |  |                 |        |                   |  |           |     |       |  |  |        |  |  |  |        | 
|------------ |  | --------------- | ------ | ----------------- |  | --------- | --- | ----- |  |  | ------ |  |  |  | ------ | 
|             |  | Portal Services |        | Software Products |  | Corporate |     | Total
|             |  |                 |        |                   |  |           |     |      
|Total assets |  |                 | 17,222 |                   |  |           | 811 |       |  |  | 73,774 |  |  |  | 91,807 | 

Total assets by segments at September 30, 2002 (in thousands):

|             |  |                 |        |                   |  |           |        |       |  |  |         |  |  |  |         | 
|------------ |  | --------------- | ------ | ----------------- |  | --------- | ------ | ----- |  |  | ------- |  |  |  | ------- | 
|             |  | Portal Services |        | Software Products |  | Corporate |        | Total
|             |  |                 |        |                   |  |           |        |      
|Total assets |  |                 | 18,867 |                   |  |           | 17,633 |       |  |  | 108,716 |  |  |  | 145,216 | 

At December 31, 2002, approximately 13% of our tangible long-term assets
were located outside the United States.

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INKTOMI CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The following table sets forth revenue information for geographic areas
(in thousands):

|                    |  |                            |        |      |  |   |        | 
|------------------- |  | -------------------------- | ------ | ---- |  | - | ------ | 
|                    |  | For the Three Months Ended
|                    |  | December 31,              
|                    |  |                           
|                    |  | 2002                       |        | 2001
|                    |  |                            |        |     
|United States       |  | $                          | 10,105 |      |  | $ | 28,121 | 
|Europe              |  |                            | 1,685  |      |  |   | 1,809  | 
|Asia                |  |                            | 2,065  |      |  |   | 3,120  | 
|                    |  |                            |        |      |  |   |        | 
|Total Revenue
Total |  | $                          | 13,855 |      |  | $ | 33,050 | 
|                    |  |                            |        |      |  |   |        | 

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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations




This Report contains 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, including, without limitation, statements regarding our
expectations, beliefs, intentions or future strategies that are signified by
the words expects, anticipates, intends, believes, may, will or
similar language. All forward-looking statements included in this document are
based on information available to us on the date hereof, and we assume no
obligation to update any such forward-looking statements. Actual results could
differ materially from those projected in any such forward-looking statements.
In evaluating our business, prospective investors should carefully consider the
information set forth below under the caption Factors Affecting Operating
Results set forth herein. We caution investors that our business and financial
performance are subject to substantial risks and uncertainties.

Overview

We are a leading OEM
provider of World Wide Web search services for Internet portals and
search destination sites. Through our paid inclusion services, we
also provide content publishers greater access to end users through
postal and destination site customers of our search engine services.

On December 22, 2002, we entered into a definitive merger agreement with
Yahoo! Inc. Under the agreement, a newly incorporated wholly-owned subsidiary
of Yahoo! will merge with and into Inktomi, with Inktomi remaining as the
surviving legal entity and a wholly-owned subsidiary of Yahoo! Under the terms
of the merger agreement, upon completion of the merger, Yahoo! will pay to
Inktomis stockholders $1.65 per share of Inktomi common stock outstanding and
will assume any outstanding options to purchase Inktomi common stock.

The merger is subject to a number of conditions including, among other
things, approval of Inktomis stockholders and regulatory approvals and
clearances, including under the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended. On February 10, 2003, the required waiting period under the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, expired. We
currently expect the merger to be completed in the quarter ending March 31,
2003. There can be no assurance that the merger will be consummated. In the
event that the proposed merger fails to close, under certain circumstances we
will be required to pay Yahoo! a termination fee of $11.2 million.

Web search services revenues consisting of revenues from our Web search
and search marketing solutions businesses are generated through a variety of
contractual arrangements, which include general service fees, per-query search
fees, various forms of click through fees and search service hosting fees.
Subscription fees and other fixed periodical fees are recognized ratably over
the contract period. Per-query fees and click through fees are recognized based
on the activity in the period.

Licenses revenues are composed of license and upgrade fees in connection
with our content networking products, including our Traffic Server network
cache platform, our Content Delivery Suite software solutions, our Media
Products, Traffic Core, Traffic Edge, Traffic Controller, Inktomi Media
Publisher, and our Personal Edge product. License fees are generally based on
the number of CPUs or nodes running the software, or on network traffic
throughput across our products, depending on customer deployment, and are
generally recognized upon shipment of the software assuming all other revenue
recognition criteria have been met.

Maintenance service revenues are generated through maintenance fees
related to our software products. Maintenance service fees are recognized
ratably over the term of the maintenance agreement.

Other services revenues are composed of revenues generated through
consulting. Consulting fees are recognized as the services are performed or
upon customer acceptance.

Since April 2001, we have undertaken a number of restructurings,
particularly workforce reductions and real estate consolidations, to
react to market conditions. In July 2002,
our work force reductions were particularly significant in our content
networking group, which has historically generated revenues from the now
struggling service provider market. In addition to the workforce reductions, we
also significantly reduced the

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resources devoted to this business. Further, in November 2002, we signed
an agreement with Satyam Computer Services Ltd. to assign and, in some cases,
subcontract the support for our remaining content networking software
customers. Satyam is a provider of professional services in offices worldwide.
Satyam took over most support obligations beginning in January
2003. In exchange, we pay Satyam a one-time fee, provide initial training and
transfer of certain computer infrastructure components to allow for customer
support. The cost of the agreement is approximately $1.0 million which will be
recognized over the remaining life of existing customer support contracts. We
expect revenues and expenses for our content networking product line to
eventually decline to zero in fiscal 2003.

Further, in December 2002, we consummated the divestiture of our
Enterprise Search division to Verity, Inc. in a transaction accounted for as a
sale of assets. As part of the sale, we received $22 million in cash, with
an additional $3 million to be paid within 18 months of the closing of this
asset sale, subject to certain conditions. As a result of the divestiture the
results of operations and cash flows for the Enterprise Search
division have been classified as discontinued operations in the statement of operation and
statement of cash flow for the three months ended December 31, 2001 and 2002.

As a result of these restructurings, our current business is focused
primarily on providing World Wide Web search services for Internet portal and
search destination sites. Inktomi Web search provides a customizable, private
label solution that offers portals and destination sites the ability to serve
differentiated, highly relevant search results. Inktomi Web search, through its
paid inclusion services, also provides content publishers greater access to end
users through portal and destination site customers of our search engine
services.

Critical Accounting Policies

The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require
management to make estimates and assumptions. On an ongoing basis, we evaluate
our estimates and assumptions, including those related to revenue recognition,
impairment of long-lived assets, allowance for doubtful accounts and contingent
liabilities related to lease obligation. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. We believe that the following critical
accounting policies may involve a higher degree of judgment and complexity.

Revenue Recognition

Web search services

Web search services revenues are generated through a variety of
contractual arrangements, which include general service fees, per-query search
fees, database inclusion fees, maintenance fees and search service hosting
fees. General services fees and per-query search fees are based, and
recognized, on the query volume in the period or the minimum payments of the
respective contract. Database inclusion fees are generated from customers who
pay on a click-through basis, in some cases also upon sale of their product,
and customers who pay a flat rate per page to be included in the Inktomi
database. Fees based on click-throughs are recognized based on the activity for
that period. Fees based on a flat rate per universal resource locator (URL)
are recognized ratably over the term of the contract. Maintenance fees and
search services hosting fees are recognized ratably over the term of the
contract.

For all Web search services, revenue is recognized when persuasive
evidence of an arrangement exists, the services have been delivered,
performance obligations have been satisfied, no refund obligations exist and
collection is reasonably assured. Revenue share amounts are offset against
revenue.

We estimate whether collection is reasonably assured based on our
knowledge of the customers payment history with us and other sources that may
include use of third-party credit rating agencies. Actual collection of amounts
from customers will depend on customer specific circumstances and therefore
amounts, which we have determined that collection is assured, may ultimately
not be collected. For customers where we do not believe that collection is
reasonably assured, primarily smaller resellers of and subscribers to our paid
inclusion services, revenue is recognized when the customer makes payment,
provided all other criteria for revenue recognition is met.

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We estimate whether fees are fixed and determinable based on contractual
terms of the arrangement. We generally do not offer rights of refund or
acceptance provisions. We do not record revenue until the lapse of these
provisions, if provided. We assess whether there is sufficient history of
collection for any payment terms provided to customers which are longer than
what we provide the majority of our customers. We recognize revenue when
amounts become due for any amounts considered to be extended payments.

Licenses

Licenses revenues are composed of license and upgrade fees in connection
with our software products including Traffic Server network cache platform,
Content Delivery Suite software solutions, Media Products, Traffic Core,
Traffic Edge, Traffic Controller, Inktomi Media Publisher, and Personal Edge.
License fees are generally based on the number of CPUs or nodes running the
software, or on network traffic throughput across our products, depending on
customer deployment, and are generally recognized upon shipment of the software
assuming all other revenue recognition criteria have been met.

We recognize revenues from software licenses when the licensed product is
delivered, collection is reasonably assured, the fee for each element of the
transaction is fixed or determinable, persuasive evidence of an arrangement
exists, and vendor-specific objective evidence exists to allocate the total fee
to any undelivered elements of the arrangement.

Fees from licenses sold together with support and upgrade rights,
consulting and implementation services are generally recognized upon delivery
provided that the above criteria have been met, payment of the license fees is
not dependent upon the performance of the services and the services are not
essential to the functionality of the licensed software. Services are unbundled
from these arrangements based on the price when sold separately, or in some
instances for support and upgrades, substantive renewal rates using the
residual method.

We assess numerous factors of services provided with licenses sold in
order to determine whether they are essential to the functionality of the
software including, but not limited to, our history of providing similar
services, whether other vendors can provide similar services, whether core
software is being changed and whether customer collection of license fees are
contingent upon completion of services. Our assessment of these factors is
based on our knowledge of the service market, the software functionality which
the customer is purchasing and the contractual terms of the arrangement.

Revenue on upgrade rights is recognized ratably over the term of the
agreement and included in licenses revenue.

Maintenance services

Maintenance services revenues are generated through the sale of support
services in connection with initial license sales and renewals of support
services after the initial service period. Support services generally have a
term of one-year and are recognized over the term of the support agreement.

Other services

Other Services revenues are composed of revenues generated through
consulting services. Consulting fees are recognized as the services are
performed or upon customer acceptance. In instances where the criteria for
recognizing license revenues separate from the consulting or implementation
revenues have not been met, both the licenses and consulting fees, excluding
the maintenance and support elements, are recognized using contract accounting.
When management can make reliable estimates on the extent of consulting
services required for full functionality, the revenue for the licenses and
consulting fees is recognized on a percentage-of-completion based on labor
hours incurred compared to total estimated hours. When management cannot make
reliable estimates on the extent of consulting services required for full
functionality, the revenue for the licenses and consulting is deferred until
the consulting services are completed. We classify revenue from these
arrangements as licenses and services revenues, respectively, based upon the
vendor-specific objective evidence of each element.

Impairment of Long-Lived Assets

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We review our long-lived assets, including property, plant and equipment,
goodwill and other intangibles, for impairment whenever events or changes in
circumstances indicate that the carrying amount of such an asset may not be
recoverable. Events or changes in circumstances that we consider as impairment
indicators include, but are not limited to the following:



| |  |  | significant underperformance relative to expected historical or projected future operating results;                                                                             
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | significant changes in the manner of use of the acquired assets or the strategy for our overall business;                                                                       
|
| |  |  | a significant decrease in the market price of a long-lived asset;                                                                                                               
|
| |  |  | significant adverse economic and industry trends;                                                                                                                               
|
| |  |  | a current expectation that, more likely than not, a long-lived
asset will be sold or otherwise disposed of significantly before the
end of its previously estimated useful life;
|
| |  |  | significant decline in our stock price for a sustained period; and                                                                                                              
|
| |  |  | our net book value relative to our market capitalization.                                                                                                                       

Estimates of cash flows related to sublease income and other real estate
estimates are based on historical and current information obtained from
commercial real estate brokers. This information requires significant judgment
and may change in the future.

When we determine that the carrying amount of the long-lived asset may not
be recoverable based upon the existence of one or more of the above indicators
of impairment, we measure any impairment based on a projected discounted cash
flow method using a discount rate commensurate with the risk inherent in our
current business model. Significant judgment is required in the development of
projected cash flows for these purposes including assumptions regarding the
appropriate level of aggregation of cash flows, their term and discount rate as
well as the underlying forecasts of expected future revenue and expense. We use
established valuation techniques which rely on these estimates of cash flows
which are developed based on our understanding of the underlying cash flows
expected from the long-lived asset.

In July 2001, the Financial Accounting Standards Board (FASB) issued
SFAS 142, Goodwill and Other Intangible Assets, which is effective for fiscal
years beginning after December 15, 2001. SFAS 142 requires, among other things,
the discontinuance of goodwill amortization. In addition, the standard includes
provisions upon adoption for the reclassification of certain existing
recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the testing for impairment of existing
goodwill and other intangibles. The impairment review required under SFAS 142
will involve a two-step process as follows:



| |  |  | Step 1  we will compare the fair value of our reporting units to
the carrying value, including goodwill of each of those units. For each
reporting unit where the carrying value, including goodwill, exceeds
the units fair value, we will move on to step 2. If a units fair
value exceeds the carrying value, no further work is performed and no
impairment charge is necessary.                                                                                                                                                                
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Step 2  we will perform an allocation of the fair value of the
reporting unit to its identifiable tangible and non-goodwill intangible
assets and liabilities. This will derive an implied fair value for the
reporting units goodwill. We will then compare the implied fair value
of the reporting units goodwill with the carrying amount of the
reporting units goodwill. If the carrying amount of the reporting
units goodwill is greater than the implied fair value of its goodwill,
an impairment loss must be recognized for the excess.

We adopted SFAS 142 as of October 1, 2002. Upon implementation we
allocated the goodwill associated with the Quiver acquisition to a reporting
unit consisting of the Enterprise Search division. We further concluded that
since the fair value of the Enterprise Search division exceeded the carrying
value, including the Goodwill from the Quiver acquisition there was no further
need for an impairment assessment. As of December 31, 2002 no goodwill remains
on the balance sheet.

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In October 2001, the FASB issued SFAS 144, Accounting for the Impairment
or Disposal of Long-lived Assets. The objectives of SFAS 144 are to address
significant issues relating to the implementation of SFAS 121, Accounting for
the Impairment of Long-lived Assets to be Disposed of, and to develop a single
accounting model, based on the framework established by SFAS 121, for
long-lived assets to be disposed of by sale, whether previously held and used
or newly acquired. Additionally, SFAS 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from
the ongoing operations of the entity in a disposal transaction. Although SFAS
144 supercedes SFAS 121, it retains some fundamental provisions of SFAS 121.
SFAS 144 is effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. We implemented SFAS 144 during the quarter ended December 31, 2002. In
accordance with the provisions of SFAS 144 we accounted for the sale of our
Enterprise Search division as discontinued operations presenting the effect of
the enterprise search division separately in the statements of operations and
cash flow (see Note 2 of the condensed consolidated financial statements).
Other than this the implementation of SFAS 144 did not have a material effect
on our financial statement.

Restructurings

We monitor our organizational structure and associated operating expenses
periodically. Depending on events and circumstances we may decide to
restructure our business to reduce operating costs which may include
terminating employees, abandoning lease space and incurring other exit costs.
We accrue for the restructuring costs when all of the following occur: (1)
management commits to the restructuring plan, (2) the termination benefits are
communicated to employees subject to termination or other exit costs are
estimated in detail, (3) the plan of termination identifies the number of
employees, classification and location, and (4) the period of time to complete
the restructuring indicates that significant changes are not likely.

Any resulting restructuring accrual includes numerous estimates made by
management. Estimates of exit costs are developed based on our knowledge of the
activity being effected and existing commitments and the cost to exit those
commitments. Lease abandonment estimates include estimates of sublease income
which are based on historical and current information often obtained from
commercial real estate brokers. This information requires significant judgment
and may change in the future, which may impact the restructuring accrual. For
instance, subsequent to an accrual of lease abandonment we may negotiate a
lease termination payment with the landlord which is different than the initial
accrual. We monitor our initial estimates periodically and will record an
adjustment for any significant changes in estimates.

In June 2002, the FASB issued SFAS 146, Accounting for Exit or Disposal
Activities. SFAS 146 addresses significant issues regarding the recognition,
measurement, and reporting of costs that are associated with exit and disposal
activities, including restructuring activities that are currently accounted for
under EITF No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring). The scope of SFAS 146 also includes costs related to
terminating a contract that is not a capital lease and termination benefits
that employees who are involuntarily terminated receive under the terms of a
one-time benefit arrangement that is not an ongoing benefit arrangement or an
individual deferred-compensation contract. SFAS 146 will be effective for exit
or disposal activities that are initiated after December 31, 2002 and early
application is encouraged. The provisions of EITF No. 94-3 shall continue to
apply for an exit activity initiated under an exit plan that met the criteria
of EITF No. 94-3 prior to the adoption of SFAS 146. We will adopt FSAS 146 for
exit or disposal activities that are initiated after December 31, 2002. The
effect on adoption of SFAS 146 will change on a prospective basis the timing of
when restructuring charges are recorded from a commitment date approach to when
the liability is incurred.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our
customers to make required payments. Management regularly reviews the adequacy
of the allowance after considering the size of the accounts receivable balance,
historical bad debts, customers expected ability to pay and our collection
history with each customer. Management reviews significant individual invoices
that are past due to determine whether an allowance should be made based on the
factors described above. The allowance for doubtful
-24-Table of Contentsaccounts represents our best estimate, but changes in circumstances discussed
above may result in a change to the amount of the allowance.RESULTS OF CONTINUING OPERATIONSRevenuesTotal revenues were $13.9 million in the quarter ended December 31, 2002.
This represents a decrease of $19.2 million or 58% from total revenues of $33.1
million over the comparable period in fiscal 2002. The lower revenue for the
quarter was due largely to low levels of license sales in our content
networking business. For the quarter ended December 31, 2002, no customer
represented more than 10% of total revenues. For the quarter ended December
31, 2001, one customer, America Online (AOL) represented
46% of total revenues.
For the quarter ended December 31, 2001, AOL represented 70% of total license
revenues, 17% of total maintenance services revenues, 13% of total other
services revenues and 23% of total Web search services revenues.We market and sell our products to customers located in the United States
and abroad, both through our direct sales force and through our channel
partners. Historically, the percentage of sales to customers located outside of
the United States has varied substantially. We expect this variation to
continue for the foreseeable future. We have generated most of our revenues
through direct sales efforts, except in Asia where our revenues have been
principally generated through our channel partners.Web search services revenues were $9.9 million in the quarter ended
December 31, 2002. This represents a decrease of $0.7 million or 6% from total
Web search services revenues of $10.6 million in the comparable period in
fiscal 2002.Per query Web search fees were $3.1 million in the first quarter of 2002
and $7.5 million in the comparable period of 2001, or a reduction of $4.4
million or 59%. In August 2002, one of our major portal customers, AOL, did not
renew their Web search services agreement upon expiration. AOL represented
$2.4 million of revenue in the quarter ended December 31, 2001. Additionally,
net per query Web search fee revenues from Microsoft, another major portal
customer, decreased by $2.0 million primarily due to increased paid inclusion
revenue sharing payable to Microsoft.Total paid inclusion revenues were $6.9 million in the quarter ended
December 31, 2002, an increase of $3.7 million or 119% from total paid
inclusion revenues of $3.1 million in the same quarter in 2001. In the future,
we expect revenues from paid inclusion fee to continue to become a greater
percentage of our total Web search services revenues. Also going forward, we
expect Microsoft to contribute a majority of Web search service and total
company revenues. Web search revenues from Microsoft totaled $0.5 million
during the quarter ended December 31, 2002, however, query volume from
Microsofts MSN Network were also indirectly responsible for $5.1 million of
our paid inclusion revenue over the same period. Total revenue, direct and
indirect, generated through Microsofts MSN Network was $5.6 million in the
quarter ended December 31, 2002 represents 55.9% of total
Web search revenue. In February 2003, Microsoft extended its agreement with us
to provide Web search services through December, 2005.Licenses revenues were $1.8 million in the quarter ended December 31,
2002. This represents a decrease of $15.6 million or 90% from total license
revenues of $17.4 million over the comparable period in fiscal 2002. The
decrease was primarily due to lower selling efforts and demand for our content
networking products across all market segments. In July 2002, we announced a restructuring in which we
decided to focus our efforts on the Web search services market and to reduce
our investment in our content networking products group while continuing to
maintain support for our content networking software customers and partners.Maintenance services revenues totaled $1.7 million in the quarter ended
December 31, 2002, representing a decrease of $0.7 million or 29% from total
maintenance services revenues of $2.4 million over the comparable period in
fiscal 2002. The decrease was the result of the decline in our content
networking products business. Our reduced investment in our content networking
products will reduce future maintenance services revenues as current
maintenance agreements expire.-25-Table of ContentsOther services revenues totaled $0.4 million in the quarter ended December
31, 2002, representing a decrease of $2.2 million or 86% from total other
services revenues of $2.6 million over the comparable period in fiscal 2002.
The decrease was the result of the decline in our content networking products
business. We expect other services revenue to be insignificant going forward.During the quarter ended December 31, 2002, we recognized revenues of
approximately $40,000 on contracts, development, and licensing arrangements
with customers in which we are equity shareholders.Cost of RevenuesCost of revenues were $4.3 million in the quarter ended December 31, 2002,
a decrease of $3.5 million or 44% from total cost of revenues of $7.8 million
over the comparable period in fiscal 2002.Web search cost of revenues generally consist of expenses related to the
operation of our Web search business, primarily depreciation, and network and
hosting charges. Web search services cost of revenues were $2.9 million in
the quarter ended December 31, 2002, a decrease of $1.4 million or 33% from
total Web search cost of revenues of $4.3 million over the comparable period in
fiscal 2002. The decrease was primarily the result of decreased network and
hosting costs of $0.5 million, decreased depreciation of $0.6 million,
decreased royalties of $0.2 million and $0.1 of miscellaneous other cost
reductions.Licenses cost of revenues generally consist of royalties or license fees
associated with licensed technologies used in our software applications.
License cost of revenues were $0.6 million in the quarter ended December 31,
2002, an increase of $0.3 million or 78% from total license cost of revenues of
$0.3 million over the comparable period in fiscal 2002. The period to period
increase in license cost of revenues as compared to the same period in fiscal
2002 was due to increased guaranteed minimum royalty obligations. Licenses
cost of revenues do not necessarily fluctuate proportionately with licenses
revenue due to guaranteed minimum royalty obligations we have with certain
licensed technologies.Maintenance services cost of revenues generally consists of expenses
associated with our technical support department. Maintenance services cost of
revenues were $0.5 million in the quarter ended December 31, 2002, representing
a decrease of $0.6 million or 57% from maintenance services cost of revenues of
$1.1 million over the comparable period in fiscal 2002. The decrease was
primarily due to reduced headcount in our technical support department.Other services cost of revenues generally consists of expenses associated
with our consulting services. Other services cost of revenues were $0.4
million in the quarter ended December 31, 2002, representing a decrease of $1.7
million or 82% from other services cost of revenues of $2.0 million over the
comparable period in fiscal 2002. The decrease was primarily due to reduced
headcount in our consulting department. Due to excess capacity in our
professional services department, primarily in the first part of the quarter
ended December 31, 2002, gross margin from other services declined
significantly compared to the three months ended December 31, 2001. Further as
a result of the excess capacity gross margin for other services for the quarter
ended December 31, 2002 in total was negative. Although we believe revenues
from other services will decline as existing contracts relating to our content
networking business expires, we expect gross margin from other services to be
positive from next quarter and going forward.ExpensesOperating expenses include sales and marketing expenses, research and
development expenses, general and administrative expenses, amortization of
goodwill and other intangibles, restructuring costs, impairment of fixed assets
and loss on sale of fixed assets. Research and development, sales and marketing
and general and administrative expenses primarily consist of personnel and
related costs.In connection with stock option grants and our business acquisitions,
certain options granted have been considered to be compensatory. Compensation
associated with such options was $136,000 in the quarter ended December 31,
2002, representing a decrease of $1.8 million or 93% over the comparable period
in fiscal 2002. The decrease is a result of a decreased number of employees.
As of December 31, 2002, we had unamortized deferred compensation of $0.5
million, which will be charged to operations as the underlying options vest.-26-Table of ContentsOver the next several quarters, expenses are expected to decrease due to
our workforce reduction and our narrower business focus.Sales and Marketing ExpensesSales and marketing expenses consist of personnel and related costs for
our direct sales force and marketing staff and marketing programs, including
trade shows and advertising. Sales and marketing expenses were $2.9 million in
the quarter ended December 31, 2002, a decrease of $15.0 million or 84% from
total sales and marketing expenses of $17.9 million over the comparable period
in fiscal 2002. Of the $15.0 million decrease, approximately $10.2 million was
due to reduced sales and marketing headcount, $1.6 million resulted from
reduced marketing programs, $1.5 million resulted from lower commissions on
reduced sales, $0.6 from reduced depreciation expenses, $0.6 from reduced
outside services and $0.5 million resulted from miscellaneous other cost
reductions.Research and Development ExpensesResearch and development expenses consist primarily of personnel and
related costs for our development efforts. Research and development expenses
were $5.1 million in the quarter ended December 31, 2002, a decrease of $7.8
million or 61% from total research and development expenses of $12.9 million
over the comparable period in fiscal 2002. Of the $7.8 million decrease,
approximately $5.9 was due to decreased headcount as a result of the
restructurings, $1.8 from reduced depreciation expense, and $0.1 million from
miscellaneous other cost reductions. Our current research and development
efforts are focused on adding features and functionality directed to derive
additional revenue from our Web search services. We are also focused on
continuing to improve the relevance of our Web search service results and the
size and freshness of our Web search index.General and Administrative ExpensesGeneral and administrative expenses consist primarily of personnel and
related costs for general corporate functions, including finance, accounting,
purchasing, human resources, facilities and legal. General and administrative
expenses totaled $3.1 million in the quarter ended December 31, 2002, a
decrease of $2.1 million or 40% from total general and administrative expenses
of $5.2 million over the comparable period in fiscal 2002. Of the $2.1 million
decrease, approximately $1.8 million was due to reduced general and
administrative headcount, $0.3 million due to reduced depreciation expense,
$0.2 million from reduced outside consulting expense, offset by an increase of
$0.2 million of other miscellaneous expenses.Amortization of Goodwill and Other IntangiblesAmortization of goodwill and other intangibles primarily relates to
amortization of goodwill and other intangibles acquired through our purchase
acquisition of eScene. Amortization of intangibles and other assets were zero
in the quarter ended December 31, 2002, a decrease of $0.5 million or 100% from
the comparable period in fiscal 2002. The decrease was primarily due to our
impairment of all eScene goodwill in fiscal 2002.Restructuring CostsRestructuring costs from continuing operations totaled $18.9 million in
the quarter ended December 31, 2002, an increase of $16.2 million or 615% from
total restructuring costs of $2.6 million over the comparable period in fiscal
2002.In October 2002, in light of continuing economic slowdown, we announced
and substantially completed a restructuring and workforce reduction of 24
employees from continuing operations to reduce our operating expenses to adjust
to lower revenue levels. 61 employees from discontinued operations were also
part of the workforce reduction. Headcount in all functional areas were
affected by the reduction.In November 2002, in connection with the sale of our Enterprise Search
division, we announced a workforce reduction of 23 employees from continuing
operations. 35 employees from discontinued operations were also part
-27-Table of Contentsof the workforce reduction. This restructuring was completed in December
2002. Headcount was affected in the areas of corporate and business services
as well as our Enterprise Search division.As a result of the above restructurings, we incurred a charge of $18.9
million from continuing operations and $3.7 million from discontinued
operations comprised of cash-related severance and abandonment of underutilized
space. The charges for the abandonment of underutilized space included offices
in Chicago, New York, Virginia, Redwood City, San Francisco, San Diego and
international offices in Tokyo and London. These offices were closed as a
result of the reduction of employees at these locations and the Companys
decision to abandon the leases in this quarter.Approximately $11.6 million of the charge relates to one facility in
Redwood City with a remaining lease term through June 2010. Lease abandonment
costs for this facility were estimated to include the remaining lease
liabilities through the term of the lease and brokerage fees offset by
estimated sublease income. Estimates related to sublease costs and income are
based on assumptions regarding the period required to locate sub-lessees and
sublease rates which were derived from market trend information provided by
commercial real estate brokers. These estimates will be reviewed on a periodic
basis and to the extent hat these assumptions materially change due to changes
in the market, the ultimate restructuring expense for the abandoned facility
could be adjusted.Approximately $4.8 million of the above charges were paid in the quarter
ended December 31, 2002. Cash-related severance will be paid over the next six
months. The remaining lease obligations will be paid over the next seven
years.As a result of the restructuring, we expect to reduce compensation related
expenses by approximately $1.0 million per quarter for continuing operations.
We also expect to reduce facility related operating expenses by approximately
$0.8 million per quarter through the end of the lease terms. In the remaining
portion of the quarter ended December 31, 2002, we realized the expected
benefits of these restructuring efforts.See Note 3 to the condensed consolidated financial statements of this Form 10-Q
for further information.Impairment of Fixed Assets and Loss on Asset SaleImpairment of fixed assets and loss on sale of asset totaled $5.4 million
in the quarter ended December 31, 2002, an increase of $4.1 million or 312%
from $1.3 million over the comparable period of fiscal 2002.During the quarter ended December 31, 2002, we incurred $1.9 million of
asset impairment charges as a result of our restructurings (see Note 3 to the
condensed consolidated financial statements of this Form 10-Q). The downsizing in our field offices
resulted in the abandonment of fixed assets. The $1.9 million write-down
represents $0.1 million of computer equipment, $0.3 million of abandoned
assets, primarily computer equipment and furniture and fixtures, and leasehold
improvements from our Tokyo office, $0.8 million of abandoned assets, primarily
computer equipment and furniture and fixtures, and leasehold improvements from
our London office and $0.7 million of abandoned furniture and fixtures and
leasehold improvements from various offices in the U.S.In August 2000, we entered into an operating lease agreement for the land
and facilities of our corporate headquarters, known as Bayside, in Foster City,
California. This operating lease was commonly referred to as a synthetic lease
because it represents a form of off-balance sheet financing under which an
unrelated third-party funds 100% of the costs of the acquisition of the
property and leases the asset to Inktomi as lessee. Under the lease terms, we
were required to pay lease payments for five years to the lessor. The payments
were calculated based on a floating interest rate applied against a $114
million principal value.In August 2002, through the execution of a Termination and Release
Agreement, we exercised the purchase option under our operating lease
arrangement for the Bayside corporate headquarters. Title for such facilities
was transferred to Inktomi on such date. We paid $114.0 million to Deutsche
Bank and its affiliates, the holders of the synthetic lease, for the purchase
of the Bayside corporate headquarters. At the purchase date we valued the
Bayside corporate headquarters at $44.8 million based on established valuation
techniques.-28-Table of ContentsOn December 20, 2002, we completed the sale of our Bayside corporate
headquarters for $41.6 million which resulted in a loss of $3.4 million. We
also entered into a five-year lease with the facilities new owner for the
portion of the property that we occupy for an aggregate lease commitment of
$9.8 million net of costs.See Note 4 to the
condensed consolidated financial statements of this Form 10-Q for further information.Impairment of Goodwill and Other IntangiblesDuring the quarter ended December 31, 2001, we evaluated the remaining
goodwill associated with our asset purchase from Adero in December 2000 and
recorded a $1.8 million charge to write-off the remaining net book value of
this intangible asset as there would be no further revenue streams related to
this asset.Other Income, NetOther income, net generally includes interest on our cash and cash
equivalents and short-term investments, less expenses related to our debt and
capital lease obligations and gains and losses on disposal of assets and sale
of investments. Other income, net, totaled $1.4 million in the quarter ended
December 31, 2002, a decrease of $2.0 million or 58% from total other income of
$3.4 million over the comparable period in fiscal 2002. The decrease in other
income, net, was primarily due to a decrease in interest income of $1.4
million, increase in interest expense of $0.1 million, and $0.5 million
increase in miscellaneous other expenses.Income Tax ProvisionOur income taxes totaled $27,000 in the quarter ended December 31, 2002, a
decrease of $0.2 million and 86% over the comparable period in fiscal 2002.
Our income taxes primarily are a result of our international operations. Our
effective income tax rate may change during the remainder of fiscal 2003 if
operating results differ significantly from current projections. We expect
income taxes to remain minimal until we begin to generate taxable income.RESULTS OF DISCONTINUED OPERATIONSThe Enterprise Search division is accounted for as a discontinued
operation and, therefore, the results of operations have been removed from the
Companys results of continuing operations. Income from discontinued
operations totaled $7.5 million in the quarter ended December 31, 2002, an
increase of $23.1 million from total loss from discontinued operations of $15.6
million over the comparable period in fiscal 2002. Of the $23.1 million
increase, approximately $12.4 million was due to the gain from the sale of the
Enterprise Search division to Verity, reduction in cost of revenues of $0.6
million, reduction of $16.0 million in amortization of goodwill, offset by a
increase in restructuring charges of $3.6 million, and reduction in revenues of
$2.3 million.The gain on disposal is calculated as follows:

|                                     |                                           |   |        |        |  
|------------------------------------ | ----------------------------------------- | - | ------ | ------ | -
|Proceeds from disposal               |                                           | $ | 22,000 |       
|Net assets and liabilities disposed: |                                           |   |        |       
|                                     | Accounts receivable, net                  |   |        | (2,445 | )
|                                     | Prepaid expenses and other current assets |   |        | (649   | )
|                                     | Property and equipment, net               |   |        | (237   | )
|                                     | Other intangibles, net                    |   |        | (9,896 | )
|                                     | Deferred revenue                          |   |        | 5,623  |  
|Disposal fees                        |                                           |   | (2,000 | )     
|                                     |                                           |   |        |       
|Gain on disposal                     |                                           | $ | 12,396 |       
|                                     |                                           |   |        |       

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Liquidity and Capital Resources

Cash and cash equivalents and short-term investments totaled $59.1 million
at December 31, 2002, an increase of $13.7 million or 30% from $45.4 million at
September 30, 2002.

For the quarter ended December 31, 2002, net cash used in operations of
$14.9 million was primarily attributable to a net reduction in working capital
as we have contracted our operations.

For the quarter ended December 31, 2002, net cash provided from investing
activities of $52.2 million was primarily attributable to proceeds from the
sale of our Bayside building.

For the quarter ended December 31, 2002, net cash used in financing
activities of $27.4 million was primarily attributable to principle payments on
our notes payable.

For the quarter ended December 31, 2002, net cash provided from
discontinued operations of $17.2 million was primarily attributable to proceeds
from the sale of the Enterprise Search division to Verity, partially offset by
expenses and net assets related to the division that were sold as part of the
transaction.

From time to time, we have used debt and leases to partially finance
capital purchases. At December 31, 2002, we had $3.4 million in total loans and
capitalized lease obligations outstanding. Our underlying assets collateralize
the loans, and the underlying equipment obtained through the lease agreements
collateralizes each capitalized lease. Approximately $2.4 million of our debt
at December 31, 2002 was in the form of bank loans. Our bank loans are subject
to specific financial covenants that are reported to the bank monthly. The
covenants (i) require minimum unrestricted cash, cash equivalents and short
term investments of $27.5 million, (ii) provide that we cannot incur GAAP loss
of more than $10.3 million, $7.6 million, $4.7 million, $1.3 million for the
quarters ended December 31, 2002, March 31, 2003, June 30, 2003 and September
30, 2003 respectively, (iii) require that we maintain all US bank deposits
at the bank, and (iv) require that we maintain at least
$25.0 million of tangible net worth.

Any one or more of the following events would constitute a default under
the bank facility: payment default, covenant default, the occurrence of a
material adverse change, default under certain other agreements, subordinated
debt and judgments, misrepresentations regarding information we have disclosed
to the bank, and insolvency. Upon the occurrence of a default the bank may
declare all obligations due and payable immediately, settle or adjust disputes
and claims directly with account debtors for amounts that the bank considers
advisable, make such payments as necessary to protect its security interest in
the collateral, apply company balances held by the bank to the obligations, and
sell the collateral.

We violated the minimum cash balance covenants for the months ending
October and November 2002. The bank waived the covenant violations in December
2002. In December 2002, the bank waived the GAAP loss covenant for the quarter
ended December 31, 2002. We violated the tangible net worth
covenant for December 2002 and January 2003 and received a waiver
from the bank. The bank also prospectively waived the tangible net
worth covenant for February 2003.

Our corporate headquarters consist of approximately 130,000 square feet of
office space in Foster City, California. In December 2002, we sold the property
totaling 261,000 square feet, including our corporate headquarters and leased
back the portion we now occupy. The lease is for a period of five years
renewable at our election for three successive five-year periods. The lease may
also be terminated at our election after two years in exchange for a fee.
Aggregate payments to be made under the lease are approximately $9.8 million
over the lease term ending December 19, 2007, net of costs.

At September 30, 2002, we had a note resulting from the lease termination
agreement with the landlords of our Parkside facilities. From the note
inception to January 21, 2003, we applied an imputed annual interest rate of
6%. The loan was payable $5.0 million on or before October 1, 2002 and the
remainder earlier of (i) January 21, 2003 or (ii) the date of the sale of the
Bayside facility. On October 1, 2002, we paid the initial amount due of $5.0
million and on December 20, 2002, we paid the remaining $16.5 million upon the
close of the Bayside facility. This loan was collateralized by our Bayside
corporate headquarters facility.

On January 2, 2003, we executed a lease termination agreement providing
for the termination of

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certain of Inktomis long-term leases located at 81 Aldwych, London England.
In exchange for agreeing to terminate these leases, we agreed to pay to the
landlords $2.8 million. The lease had termination dates through September
2015 and lease payments of up to approximately $1.2 million annually.

In December 2001, our Board of Directors approved a $5 million revolving
line of credit to our Chief
Executive Officer. As of December 31, 2002, total loans outstanding and total
accrued interest to our Chief Executive Officer were approximately $4.9 million
and $234,000, respectively. During the quarter ended December 31, 2002,
additional interest of $74,000 was accrued. These loans are unsecured and are
represented by full recourse promissory notes accruing interest at the rate of
6% per annum. Each loan, plus any accrued unpaid interest, will become due the
earlier of either two years from the grant date of the individual loan or the
date that our Chief Executive Officer leaves the Company. All after tax
proceeds of compensatory bonuses and 50% of after tax proceeds from sales of
Company stock must be used to pay down the loans outstanding. The first loans
will become due in December 2003.

Our capital and liquidity requirements depend on numerous factors,
including market acceptance of our products and services, economic conditions
impacting our revenue generation, the resources we devote to developing,
marketing, selling and supporting our products and services, the resources we
commit to facilities, the timing and extent of our investments, the value of
our investments in equity securities and real estate, acquisition and
restructuring costs, restructuring and asset disposition, opportunities and the ability to raise capital and other factors. We believe that we have
adequate cash resources to fund operations for at least the next twelve months.

Other Matters

At a meeting held on December 10, 2002, our Audit Committee approved
future non-audit tax services, including tax planning and tax compliance, to be
performed by PricewaterhouseCoopers LLP in fiscal 2003. The Audit Committee
also approved other non-audit services to be performed by
PricewaterhouseCoopers LLP in fiscal 2003, including transaction services such
as pre- and post-acquisition activities and due diligence, where the aggregate
fees for such services did not exceed $50,000. The Chairman of the Audit
Committee has been delegated the authority to approve these other non-audit
services to the extent they exceed $50,000.

Factors Affecting Operating Results

Interested persons should carefully consider the risks described below in
evaluating us. Additional risks and uncertainties not presently known to us or
that we currently consider immaterial may also impair our business operations.
If any of the following risks actually occur, our business, financial condition
or results of operations could be materially adversely affected. In that case,
the trading price of our common stock could decline.



| |  |  | If the proposed merger with Yahoo! is not completed, our business and stock
price may be adversely affected.
| |  |  | ------------------------------------------------------------------------------------------------------------

On December 22, 2002, we entered into a definitive merger agreement with
Yahoo! Inc. The merger is subject to a number of contingencies, including
approval by a majority vote of our stockholders, receipt of regulatory
approvals and other customary closing conditions. Therefore, there is a risk
that the merger will not be completed or that it will not be completed in the
expected time period. If the merger is not completed, we could be subject to a
number of risks that may adversely affect our business and stock price,
including:



| |  | the trading price of our common stock might decline to the extent that
the current trading price reflects a market assumption that the merger
will be completed;                                                                                                              
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we have and will continue to incur significant expenses related to the
merger prior to its closing, including fees paid to an investment bank
for a fairness opinion for the merger, and legal and accounting fees,
that must be paid even if the merger is not completed; and
| 
| |  | if the merger agreement is terminated under certain circumstances, we
may be obligated to pay Yahoo! an $11.2 million termination fee.                                                                                                                                        

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If completion of the merger is substantially delayed, we could be subject
to a number of risks that may adversely affect our business and stock price,
including:



| |  | the trading price of our common stock might not exceed $1.65 to the
extent that the trading price reflects a market assumption that the
merger will be completed; and                                        
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | we could suffer repercussions from the limitations on our ability to
conduct our business that we are bound by (until the merger is
completed or the merger agreement is terminated) in the merger
agreement.

In connection with
the proposed merger, we mailed to our stockholders
and filed with the SEC a definitive proxy statement which will contain important
information about Inktomi, the proposed merger and related matters. We urge you
to read the definitive proxy statement when it becomes available.



| |  |  | The uncertainty created by the proposed merger could have an adverse effect on
our revenue and results of operations.
| |  |  | ---------------------------------------------------------------------------------------------------------------------

Due to our agreement to be acquired by Yahoo!, we are and will continue to
be operating in a state of uncertainty about our future until the proposed
merger is either completed or the merger agreement is terminated. As a result
of this uncertainty, customers may decide to delay, defer, or cancel purchases
of our products pending resolution of the proposed merger. If these decisions
represent a significant portion of our anticipated revenue, our results of
operations and quarterly revenues could be substantially below the expectations
of market analysts.



| |  |  | Our recent sale of our
Enterprise Search division to Verity and the
announcement of the sale of our Company to Yahoo! could impair existing
relationships with our suppliers, customers, strategic partners and employees,
which could have an adverse effect on our business and financial results.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The recent closing of
the sale of our Enterprise Search division assets to
Verity and the public announcement that we have entered into a definitive
merger agreement with Yahoo! could substantially impair important business
relationships because of uncertainty regarding our future strategic direction
and the distraction completing these transactions will create. Impairment of
these business relationships could reduce revenues or increase expenses, either
of which could harm our financial results. Specific examples of situations in
which we could experience problems include the following:



| |  | suppliers, distributors or customers could decide to cancel or
terminate existing arrangements, or fail to renew those arrangements,
as a result of either the asset sale or the pending merger with
Yahoo!;                                    
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our employees may be distracted by concerns about the pending merger
with Yahoo! and therefore may not meet critical deadlines in their
assigned tasks or otherwise perform effectively;                                                        
| 
| |  | our management personnel may be distracted from day-to-day operations
by the time demands associated with these significant corporate
transactions and therefore may be unable to timely identify and
address business issues as they arise; and
| 
| |  | other current or prospective employees may experience uncertainty
about their future roles with us, which could adversely affect our
ability to attract and retain key management, sales, marketing and
technical personnel.                    



| |  |  | If the proposed merger with Yahoo! is completed,
shares of Inktomi common stock will no longer
represent equity interests in Inktomis business.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------

If the proposed merger with Yahoo! is completed, each share of Inktomi
common stock will be converted into the right to receive $1.65 and will no
longer represent an equity interest in Inktomi. Because of this conversion,
stockholders will not be able to share in any potential future growth of
Inktomis business.



| |  |  | If we do not increase our revenues, we will fail to achieve or sustain operating profitability.
| |  |  | -----------------------------------------------------------------------------------------------

We are not currently profitable, and our revenues have declined in recent
periods. To achieve and sustain operating profitability on a quarterly and
annual basis, we will need to increase our revenue associated with our Web
search services. We plan to continue to invest in technology and marketing to
develop and improve our products and services and increase market share, but
these investments and expenditures may not result in increased revenues. In

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the future, our revenues may continue to decline, remain flat, or grow at
a slow rate, particularly in light of the current market environment.

In the absence of substantial and sustained revenue growth, we cannot
predict when or if we will become profitable. If we fail to achieve
profitability or display significant progress towards profitability, our stock
price may fall due to a lower perceived value, customers may defer or delay
purchases based on our financial condition, our relationships with our partners
and distributors may suffer, and we may breach financial covenants in our
financial arrangements.

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 reductions, we expect to continue to make appropriate
investments to develop and market products for the information retrieval
markets, improve our customer support capabilities, develop new distribution
channels, and fund research and development. These investments and expenditures
may not result in increased revenues in the near term, if at all.



| |  |  | Recent restructuring efforts have resulted in our recognizing substantial
charges. These restructuring efforts may not improve our operating results or
financial condition and there exists uncertainty as to whether these actions
will be successful.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In order to reduce our recurring losses, we have taken a number of actions
to reduce our expenses. In fiscal year 2002 and continuing in October 2002, we
implemented restructuring initiatives where we consolidated operations, closed
certain branch offices, reduced headcount across all business units, sold
certain assets and reduced our content networking products group. In the event
these restructurings were implemented too late or at insufficient levels, our
expenses will be too great over coming periods to achieve profitability. In
addition, there is a risk that these cost-cutting actions will impair our
ability to effectively develop and market products and services and remain
competitive in the industries in which we compete. In the future, we may
undertake additional expense reducing actions that may involve one-time
expenditures related to severance, facilities or real estate. The impact of
these one-time expenses on our financial statements may adversely impact our
perceived value.



| |  |  | If customers choose not to use or promote our Web search services, our revenue
will decrease and our growth opportunities will suffer.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------

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 Web search services, 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 declining market for Internet portals has limited the market opportunities
for our Web search services business and has adversely affected demand for our
services. Consequently, our Web search revenues are largely dependent upon a
relatively small number of large portal customers.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Many of our smaller search services customers have elected not to renew
their contracts and our market opportunity from portals has become more
limited. Many smaller and medium size portals are not profitable, suffer from
declining revenue growth and have limited access to capital to fund operational
needs, which has resulted in consolidation in the portal industry. In addition,
many portals are terminating their operations. As a result, our Web search
revenues have become increasingly dependent on a relatively few number of major
customers. Economic conditions may lead such customers to stop paying for Web
search services, to only pay for such services at highly reduced rates or to
leave our services in favor of competitors offering Web search services bundled
with other offerings. In order for us to increase revenues from our Web search
services business, we will need to attract new
-33-Table of Contents

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
search marketing solutions for content publishers.



| |  |  | A large percentage of our current revenue is dependent on one customer and if
this customer stops utilizing our search services, our revenues will decline.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------

Our Web search revenue is dependent upon the distribution channel provided
through the portal customers serving our search queries. Should any significant
portal customer reduce or stop utilizing our search services our search
marketing solutions revenue would decline. Currently, Microsoft is our largest
portal customer, accounting for either directly or indirectly for $5.6 million
of our revenue for the quarter ended December 31, 2002. Microsofts Web search
services agreement with us expires in December 2005 and we do not know whether
Microsoft intends to renew this agreement upon its expiration or, if this
agreement is renewed, whether it will be renewed on the same terms and
conditions as currently exist. In addition, we expect revenues from our paid
inclusion fee business to continue to become a greater percentage of our total
Web search services revenues. Query volume from Microsofts MSN Network was
indirectly responsible for $5.1 million of paid inclusion revenue in the
quarter ended December 31, 2002. Should Microsoft cease to be a customer or
should Microsoft decide to direct less volume to our service, our business and
financial condition would be materially and adversely affected. In addition,
AOL, one of our largest portal customers, did not renew its Web search services
agreement with us when it expired in August 2002. For the fiscal year ended
September 30, 2002, AOL represented $8.3 million in Web search services revenue
representing 17.5% of total Web search services revenue for this period.
Revenues from our Web search services decreased as a result of the loss of AOL
as a customer.



| |  |  | The shift in our focus away from the content networking market could have a
material adverse effect on our operating results.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------

Our shift in strategy away from content networking will likely reduce the
average size of our software transactions and corresponding services revenue.
We expect revenues from content networking to be insignificant going forward.
In order to maintain existing revenue levels or achieve any revenue growth, we
will need to significantly increase revenue from our existing Web search
services business. Since the quarter ended December 2000, we have experienced a
decline in licenses revenue from sales of our content networking software
products. In July 2002, we announced a shift in our strategy to reduce our
investment in our content networking products group and focus our business on
the Web search services and enterprise search software markets. In December
2002, we consummated the sale of our enterprise search business. We may not be
able to increase our Web search revenues in amounts sufficient to offset lost
revenues from our content networking business. Although we intend to continue
to support customers who purchased our content networking software products and
partners marketing such products, such customers and partners may view our
strategic shift as a breach of certain obligations we have to them. In
addition, in November 2002, we signed an agreement with Satyam Computer
Services Ltd. to assign and, in some cases, subcontract the support for our
remaining content networking software partners. Satyam is a provider of
professional services employees in offices worldwide. In exchange we have paid
Satyam a one-time fee of $1 million, provided initial training and transferred
certain computer infrastructure components to Satyam to allow for customer
support. In the event Satyam fails to provide quality customer support to our
content networking software customers and partners, these customers and
partners may view this as a breach of our obligations to them. If these
customers and partners were to bring or threaten legal action against us,
defending these actions could be costly to defend, time-consuming and
distracting to our management team.



| |  |  | We operate in a highly competitive and rapidly changing market, and our
inability to compete successfully against new entrants and established
companies could result in a loss of market share, fewer customer orders, price
reductions, reduced gross margins and otherwise adversely harm our financial
results.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 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,
-34-Table of Contents

name recognition in the market and capturing market share. This may cause
some price pressure on our products and services in the future. 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, Overture, Look-Smart, and Northern Light.
These companies and other competitors have focused on search result relevance,
database size metrics and ease of use to differentiate their services. 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
services, or hardware, including operating systems, browsers and network
hardware in a manner that may discourage users from purchasing services 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.



| |  |  | We may lose customers and our business will suffer if we do not develop,
license or acquire new services, products or technologies or deliver
enhancements to existing products and services on a timely and cost-effective
basis.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The markets that we target for our Web search services are characterized
by rapid technological change, frequent new product introductions, changes in
customer requirements and evolving industry standards. The introduction of
services embodying new technologies and the emergence of new industry standards
could render our existing services obsolete. Our future success and revenue
growth will depend upon our ability to develop, acquire and introduce a variety
of new services and service enhancements to address the increasingly
sophisticated needs of our customers. We have experienced delays in releasing
new services and product enhancements and may experience similar delays in the
future. Material delays in introducing new services and enhancements may cause
customers to forego purchases of our services or to purchase those of our
competitors.



| |  |  | If the use of the internet, intranets, extranets, corporate portals and web
portals does not grow as anticipated, our business opportunities would be
seriously limited.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Sales of our products and services are dependent upon the development and
increased use of corporate intranets, extranets, portals and Websites. Global
acceptance and use of these mediums may not continue to develop at recent
historical rates. The lack of growing use or initial adoption of these mediums
by our targeted customers and their end user customers would impair demand for
our products and services and would adversely affect our ability to sell our
products and services. Demand and market acceptance for our products and
services aimed at servicing intranets, extranets, portals and Websites are
subject to a high level of uncertainty and there exist few proven services and
products. Our paid inclusion business model relies on the willingness of
retailers and service providers to allocate marketing funds to online programs.
Our business would be adversely impacted if online marketing programs become an
unpopular business tool.



| |  |  | If we do not continue to improve the effectiveness and breadth of our sales
personnel, we will have difficulty acquiring and retaining customers.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------

Our products and services often require sophisticated sales efforts
targeted at a limited number of key people within a prospective customers
organization. Because the market for our products and services is relatively
new, many prospective customers are unfamiliar with the services we offer. As a
result, our sales effort requires highly trained sales personnel. 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. If we are unable to
continue to improve our direct sales operations, we may not be able to increase
market awareness and sales of our products and services, which may prevent us
from growing our revenue and achieving and maintaining profitability.

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| |  |  | If we do not attract and retain highly trained customer service and support
personnel, we will have difficulty acquiring and retaining customers.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------

We require highly trained customer service and support personnel to
support our services and products and these personnel are difficult to replace.
We currently have a relatively small customer service and support organization
and will need to continue to provide extensive training to our staff to enable
them to support new customers, new product lines, and the expanding needs of
existing customers. 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.



| |  |  | If we do not establish and maintain productive relationships with distribution
partners who have technical and marketing expertise and who we are able to
train in our products and services, we will be unable to develop our business
and increase revenue.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our future revenue growth is dependent upon establishing and maintaining
productive relationships with a variety of distribution partners, including
OEMs, resellers, 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 before they develop the
expertise and skills necessary to effectively sell our products. Particularly,
we may be adversely affected if resellers of our paid inclusion products fail
to maintain their efforts towards promoting our services.



| |  |  | We generate a significant portion of our revenue from a limited number of
customers and, consequently, 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 portal customers
and paid inclusion 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 if there is a decline in usage of
any customers search service, our revenues would be adversely affected. AOL,
one of our major portal customers, did not renew its Web search services
agreement with us when it expired. As a result of AOL ceasing to be a customer,
a significant amount of our Web search services revenue is dependent either
directly or indirectly on Microsoft. Should Microsoft cease to be a customer
our business and financial condition would be materially and adversely
impacted. Our potential customers and public market analysts or investors may
perceive any loss of a major portal or paid inclusion customer 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 partners, companies that
supply and distribute our products, and customers, 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. We believe
these relationships are important in order to validate our technology,
facilitate broad market acceptance of our products and services, enhance our
product and service offerings, and expand our sales, marketing and distribution
capabilities. If we are unable to develop these key relationships or maintain
and enhance existing relationships across our entire product and service
offerings, we may have difficulty generating revenues.



| |  |  | We license software components that are necessary to our products and services,
and the loss of access to this software or any decline or obsolescence in its
functionality could harm our revenues and increase our costs.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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We have from time to time licensed components from others such as
reporting functions, security features, and internalization capabilities, 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 and divert the attention of our engineering resources.



| |  |  | Governmental regulation and the application of existing laws to the Internet
may increase our costs of doing business and create potential liability for the
dissemination of information over the Internet.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 Web
search services 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 products or services
contains errors, third parties could make claims against us for losses incurred
in reliance 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 by increasing our
costs of doing business and our potential liability.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------

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.



| |  |  | Our future success is dependent on our ability to attract and retain
experienced and capable personnel and our business will therefore suffer if we
are unable to attract or retain the highest qualified personnel necessary for
our success.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 for the initial option grant. In addition, we must continue to motivate
employees and keep them focused on our strategies and goals, which may be
difficult due to morale challenges posed by our workforce reductions and
general uncertainty about the economy. 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

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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 and services in the United States and
internationally, principally in Europe and Asia. Historically, the percentage
of sales to customers located outside of the United States has varied from
quarter to quarter, reflecting the limited build-out of our international
operations. We have limited experience in developing localized versions of our
products and marketing and distributing our products and services
internationally. 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;        
| 
| |  | the impact of changes in foreign currencies, in particular the EUs conversion to the Euro;
| 
| |  | 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 experience difficulties coordinating our efforts, supervising and
training our personnel or otherwise successfully managing our resources in
these foreign countries. 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.
In connection with our recent restructurings we have closed, or are in the
process of closing, most of our international sales offices and we therefore
expect our exposure to the risks and uncertainties resulting from having
offices and personnel in foreign countries to reduce over time.



| |  |  | We are currently the subject of a lawsuit by Network Caching Technology and
other third parties could assert that our products infringe their intellectual
property rights. Such claims could be expensive to defend, distracting to
management, and adversely affect our ability to sell our products.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 grow and the functionality of products in different
industry segments overlaps. 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. In August 2001, Network Caching Technology L.L.C.
(NCT) initiated an action against us alleging that our caching products violate one or
more patents owned by NCT. The complaint seeks compensatory and other damages
and injunctive relief. This case, and any future actions initiated against us,
including an action brought by Teknowledge Corporation which was filed on
October 2002, will be time consuming and expensive to defend, will distract
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. We do not expect to have any significant shipments going forward of
the products that, if the NCT lawsuit is successful, would require us to pay
royalties. Such 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

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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, 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, new products or services
or changing customer relationships 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 technology-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.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to interest rate risk primarily in our investment
portfolio. We do not use derivative financial instruments to hedge interest
rate risk. The primary objective of our investment activities is to preserve
the principal while maximizing yields without significantly increasing risk.
This is accomplished by placing our marketable securities investments with high
quality issuers principally in United States government and corporate debt
securities with terms of less than two years.

We have the option of choosing interest rates, which are fixed for various
terms not to exceed 12 months. Upon the expiration of those various rate
terms, a new interest rate will be selected for the corresponding underlying
principle value.

Under out notes payable agreement, we have borrowed $2.4 million as of
December 31, 2002. The notes payable have an interest rate at prime.

The following table presents the amounts of our cash and cash equivalents
and short-term investments that are subject to interest rate risk by year of
expected maturity/expiration of the selected interest rate terms and average
interest rates as of December 31, 2002:

|                        |                       |   |                |      |         |   |        |      |       |   |        |      |   |   |        |  | 
|----------------------- | --------------------- | - | -------------- | ---- | ------- | - | ------ | ---- | ----- | - | ------ | ---- | - | - | ------ |  | 
|                        |                       |   | FY 2003        |      | FY 2004 |   | BEYOND |      | Total
|                        |                       |   |                |      |         |   |        |      |      
|                        |                       |   | (In Thousands) |      |         |   |       
|Cash & Cash Equivalents |                       | $ | 44,365         |      |         |   |       |      |       |   |       |      |   | $ | 44,365 | 
|                        | Average Interest Rate |   |                | 0.73 | %       |   |        |     |       |   |        |     |   |   |        |  | 
|Short-term Investments  |                       | $ | 3,404          |      |         | $ | 1,041  |      |       | $ | 10,250 |      |   | $ | 14,695 | 
|                        | Average Interest Rate |   |                | 4.96 | %       |   |        | 5.70 | %     |   |        | 1.83 | % |   |        |  | 

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Foreign Currency Risk

We have foreign operations both in Europe and Asia. We currently transact
substantially all of our revenues abroad in United States currency. We are
exposed to fluctuations in foreign exchange rates for our expenditures and thus
our consolidated financial results could be affected by a change in foreign
exchange rates.




Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Within the 90 days prior to the filing of this Quarterly Report on Form
10-Q (the Evaluation Date), we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Exchange Act). Based upon that
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures are effective to ensure
that material information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms. It should be noted, however, that the design of any
system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.

(b) Changes in internal controls.

Subsequent to the Evaluation Date, there have been no significant changes
in our internal controls or in other factors that could significantly affect
these controls subsequent to the date of their last evaluation.




PART II. OTHER INFORMATION




Item 1. Legal Proceedings.

Litigation Related to our Business

In August, 2001, an amended complaint was filed by Network Caching
Technology, L.L.C. in the United States District Court for the Northern
District of California against Inktomi as well as other providers of caching
technologies including Novell, Inc., Akamai Technologies, Inc., Volera, Inc.,
and Cacheflow, Inc. Plaintiff alleges that certain products marketed by Inktomi
and the other defendants violate one or more patents owned by plaintiff. The
complaint seeks compensatory and other damages and injunctive relief. We
subsequently filed a response denying the allegations and asserting a number of
defenses. We believe these claims are without merit and we intend to vigorously
defend against them.

In October 2002, a complaint was served by Teknowledge Corporation in the
United States District Court for Delaware against Inktomi, Akamai Technologies,
Inc. and Cable & Wireless Services, Inc. The plaintiff alleges that Inktomi
products, including Traffic Server, infringe a patent owned by the plaintiff.
The complaint seeks compensatory and other damages and injunctive relief. In
November 2002, the Judge assigned to the case in Delaware transferred
jurisdiction of the case to the Northern District of California. Inktomi
intends to vigorously defend against the allegations made by the plaintiff.

From time to time, we are also involved in other legal actions arising in
the ordinary course of business. We have incurred certain amounts associated
with defending these matters. There can be no assurance the Network caching,
Teknowledge or other third party assertions will be resolved without costly
litigation, in a manner that is not adverse to our financial position, results
of operations or cash flows or without requiring royalty payments in the future
which may adversely impact gross margins. No estimate can be made of the
possible loss or possible range of

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loss associated with the resolution of these contingencies. As a result, no
losses have been accrued in our financial December 31, 2002.

Litigation Related to the Yahoo! Merger

Persons alleging to be shareholders of Inktomi have filed three lawsuits
relating to our pending merger with a wholly-owned subsidiary of
Yahoo!. On January 22, 2003, an alleged holder of Inktomi
common stock filed a purported derivative and class action lawsuit captioned
Tuttle v. Myers, et al., Case No. CIV 428695, in California Superior Court for
the County of San Mateo. The complaint names as defendants each of our five
directors and names Inktomi as a nominal defendant. The complaint alleges that,
in pursuing the transaction with Yahoo! and approving the merger agreement, the
directors breached their fiduciary duties to the holders of Inktomi common
stock and Inktomi by, among other things, engaging in self-dealing, abusing
control of the company, failing to obtain the highest price reasonably
available for Inktomi and its shareholders, committing waste of corporate
assets and failing to properly value Inktomi. The complaint further alleges
that the merger agreement resulted from a flawed process and that the directors
tailored the terms of the merger to meet the needs of two directors. The
complaint also alleges that Inktomi directly breached and/or aided and abetted
the directors alleged breaches of fiduciary duties. The complaint seeks, among
other things, certification of the litigation as a class action, a declaration
that the merger agreement was entered into in breach of the directors
fiduciary duties, a preliminary and permanent injunction enjoining Inktomi, the
directors and others from consummating the merger, a direction requiring that
the directors exercise their fiduciary duties to obtain a transaction which is
in the best interests of the Inktomi shareholders, rescission of the merger or
any of the terms thereof to the extent implemented, an award of costs,
including attorneys and experts fees, and other unspecified relief.

On January 24, 2003, an alleged holder of Inktomi common stock filed a
purported class action lawsuit captioned Malachinski v. Peterschmidt, et al.,
Case No. CIV 428824, in the California Superior Court for the County of San
Mateo. On January 29, 2003 an alleged holder of Inktomi common stock filed a
purported class action lawsuit captioned Zakary v. Peterschmidt, et al., Case
No. CIV 428898, in the same Superior Court. The complaint in the Zakary action
is substantially identical to the complaint in the Malachinski action. Both
complaints name as defendants three of our five current directors, two of our
former directors and Inktomi.

The complaints in the Malachinski and Zakary actions allege that our
directors breached their fiduciary duties in connection with the proposed
acquisition by Yahoo! by, among other things, approving a transaction in which
they allegedly stand to receive financial benefits not shared by the other
Inktomi shareholders, retaining a financial advisor (Thomas Weisel Partners)
that has business ties to Yahoo!, failing to obtain the best offer possible for
Inktomis shareholders, agreeing to the termination fee provisions of the
merger agreement, failing to adequately value Inktomi, and failing to make
complete and adequate disclosure of alleged material facts regarding the
transaction and the events that preceded the execution of the merger agreement.
The plaintiffs seek, among other things, certification of their respective
actions as class actions, a declaration that the directors have breached their
fiduciary duties, an order requiring the defendants to indemnify the
shareholders for the alleged breaches of fiduciary duty, an injunction
enjoining the merger or rescinding it, if consummated, an order requiring
defendants to make additional disclosures, an award of compensatory and/or
rescissory damages, an award of interest, attorneys fees, expert fees and
other costs, and other unspecified relief.

On January 29, 2003, the plaintiff in the Malachinski action filed a
motion for expedited discovery and an order temporarily enjoining the merger.
On January 30, 2003, the Malachinski action was removed from the Superior Court
to the United States District Court for the Northern District of California. On
January 31, 2003, the Zakary action was removed from the Superior Court to the
same District Court. We filed motions to dismiss the Malachinski and Zakary
actions on February 5, 2003 and February 6, 2003, respectively.

Based on its review of the three complaints, Inktomi believes that the
allegations in the Tuttle, Malachinski and Zakary actions are without merit and
intends, along with the directors, to defend the actions vigorously. In the
event that holders of a majority of the outstanding shares of Inktomi common
stock vote in favor of adoption of the merger agreement, in addition to any
other defenses Inktomi and the directors may assert, Inktomi and the directors
intend to rely upon the approval of the proposal to adopt the merger agreement
in defense of the claims asserted in the actions. Specifically, Inktomi and the
directors intend to argue that the approval of the proposal to adopt the merger
agreement by holders of a majority of the shares of our common stock
constitutes a ratification or acceptance of the conduct that is the subject of
plaintiffs complaints. Inktomi and the directors further intend to argue that
such

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ratification or approval constitutes a complete defense to the claims
asserted in the complaints or otherwise operates to protect them from liability
or increase the plaintiffs burdens of pleading and proof in the actions.

Other than as described above, we are not involved in any legal
proceedings at this time that our management currently believes would be
material to our business, financial condition or results of operations.




Item 3. Defaults Upon Senior Securities

See Managements Discussion and Analysis of Financial Condition and
Results of Operations; Liquidity and Capital Resources.




Item 5. Other Information

At a meeting held on December 10, 2002, our Audit Committee approved
future non-audit tax services, including tax planning and tax compliance, to be
performed by PricewaterhouseCoopers LLP in fiscal 2003. The Audit Committee
also approved other non-audit services to be performed by
PricewaterhouseCoopers LLP in fiscal 2003, including transaction services such
as pre- and post-acquisition activities and due diligence, where the aggregate
fees for such services did not exceed $50,000. The Chairman of the Audit
Committee has been delegated the authority to approve these other non-audit
services to the extent they exceed $50,000.




Item 6. Exhibits and Reports on Form 8-K

|        |  |                                                                                                                                                     |  |  |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|EXHIBIT |  |                                                                                                                                                     |  |  |  | 
|NUMBER  |  | DESCRIPTION                                                                                                                                         |  |  |  | 
|        |  |                                                                                                                                                     |  |  |  | 
|        |  |                                                                                                                                                    
|10.37   |  | Amendment No. 8
to Portal Services agreement between Inktomi Corporation and
Microsoft Corporation dated January 31, 2003.                         
|        |  |                                                                                                                                                    
|99.1    |  | Certification of Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                                                    
|99.2    |  | Certification of Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

(b)  REPORTS ON FORM 8-K



| |  |  | During the quarter ended December 31, 2002, Inktomi Corporation filed
the following current reports on Form 8-K:
| |  |  | ----------------------------------------------------------------------------------------------------------------

| |  |   |  |                                                                                                                                                                                                                        
| |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | - |  | Current report on Form 8-K, filed November 15, 2002,
announcing that Inktomi had entered into a definitive agreement
with Verity, Inc. for the sale of Inktomis enterprise search
software business.                  
| |  |   |  |                                                                                                                                                                                                                        
| |  | - |  | Current report on Form 8-K, filed December 23, 2002,
announcing that Inktomi had entered into a definitive merger
agreement with Yahoo!, Inc. pursuant to which Inktomi will become
a wholly-owned subsidiary of Yahoo!
| |  |   |  |                                                                                                                                                                                                                        
| |  | - |  | Current report on Form 8-K, filed December 26, 2002,
relating to the merger between Inktomi and Yahoo!                                                                                                                 

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##### Table of Contents






SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
undersigned, thereunto duly authorized.

| |  |                                                                                                                                                                     
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | INKTOMI CORPORATION                                                                                                                                                 
|
| |  |                                                                                                                                                                     
|
| |  |                                                                                                                                                                     
|
| |  | By:                    /s/ RANDY GOTTFRIEDRandy GottfriedSenior Vice President and Chief Financial Officer
(duly authorized officer and
principal financial officer)

Date: February 14, 2003

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##### Table of Contents






CERTIFICATIONS

I, David Peterschmidt, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Inktomi
Corporation;                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly represent in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                 
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a. |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |     |  |                                                                    
|----------------------- |  | --- |  | -------------------------------------------------------------------
|Date: February 14, 2003 |  | By: |  | /s/    DAVID PETERSCHMIDTDavid Peterschmidt
Chief Executive Officer

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CERTIFICATIONS

I, Randy Gottfried, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Inktomi
Corporation;                                                                                                                                                                                                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly represent in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                 
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a. |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|2. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|3. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                        |  |     |  |                                                              
|----------------------- |  | --- |  | -------------------------------------------------------------
|Date: February 14, 2003 |  | By: |  | /s/    RANDY GOTTFRIEDRandy Gottfried
Chief Financial Officer

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EXHIBIT INDEX

|        |  |                                                                                                                                                     |  |  |  | 
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|EXHIBIT |  |                                                                                                                                                     |  |  |  | 
|NUMBER  |  | DESCRIPTION                                                                                                                                         |  |  |  | 
|        |  |                                                                                                                                                     |  |  |  | 
|        |  |                                                                                                                                                    
|10.37   |  | Amendment No. 8 to Portal Services agreement between Inktomi
Corporation and Microsoft Corporation dated January 31, 2003.                         
|        |  |                                                                                                                                                    
|99.1    |  | Certification of Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|        |  |                                                                                                                                                    
|99.2    |  | Certification of Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

-46-