- The Washington Times - Monday, April 2, 2007

Search technology firm Convera Corp.’s sale of its RetrievalWare business to a Norwegian software maker will allow the Vienna, Va., company to devote its resources to growing its Excalibur platform, it said yesterday.

Fast Search and Transfer, based in Oslo, will pay $23 million in cash for Convera’s enterprise search business and supporting personnel. The transaction will free up manpower and money for Convera to focus on its Excalibur search product aimed at specialty publishers.

“Now that we’ve gained momentum in the vertical Web search business, we began to singularly focus on that and the sale of RetrievalWare allows us to accelerate that focus and give us the capital we need,” Chief Executive Officer Pat Condo said.

The companies expect to close the deal in the second quarter.

Convera’s Excalibur service retrieves information from both the Internet and internal databases and places it into a format chosen by the customer. The Excalibur platform can be delivered as a hosted service, software or a bundled software and hardware package.

Mr. Condo said the company has raised around $70 million in the past 18 months to build out the infrastructure for Excalibur, transitioning it from a search product to a more diverse offering that includes multiple portals and an editorial work-flow platform.

For the year ended Jan. 31, Convera reported a net loss of $44.8 million (86 cents per diluted share), a 213 percent drop over last year’s net loss of $14.3 million (33 cents).

Annual revenue from Excalibur surged more than tenfold to $270,000 compared with $20,000 in 2006. Revenue from the company’s RetrievalWare product fell 22 percent to $16.4 million from $21 million, which it attributes to the increased focus on acquiring new Excalibur customers.

During the fourth quarter, Convera, which has 160 employees, signed seven new clients, and as of Jan. 31, provides search services to the Web sites of five publications.

Under the Fast Search deal, Convera acquired rights to Fast Ad Momentum, an advertising and monetization platform the company says will help its publishing clients pursue search-based revenue for their Web sites.

Mr. Condo said the company should integrate the Ad Momentum platform by the third quarter, and aims to have about 50 Web sites selling ads by the end of the year.

“To the degree that we’re successful, I think we’ll be in the black shortly thereafter,” he said.

Analysts say the Fast Search deal makes sense for Convera.

Jupiter Research analyst Kevin Heisler said the company’s strength rests in having “technology that no one else can offer.” Unlike Internet search engines Google Inc. and Yahoo Inc., Convera works with structured data within a company’s database.

“It’s hard to balance two very different businesses like that,” Matthew Brown, a principal analyst with Forrester Research, said of Convera’s RetrievalWare and Excalibur businesses. “It’s hard for a small company to have a dual focus.”

As for the company’s financial outlook following some “relatively disappointing results over the past few years,” Mr. Brown said search-index hosting is such a nascent industry that it’s hard to tell.

“There isn’t a real precedent on the market where anyone’s made millions and millions of dollars doing that. They’ve got an uphill battle there,” he said.

Shares of Convera closed down 2 cents at $3.12 on the Nasdaq Stock Market yesterday.


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