Ask Jeeves Sells Enterprise Search Unit

Search company Ask Jeeves announced on Wednesday the sale of its enterprise software unit, Jeeves Solutions, to software company Kanisa.

In return for Jeeves Solutions’ 40 client accounts and most of its assets, including its JeevesOne enterprise search engine, Kanisa will pay $3.5 million in cash at closing along with a one-year promissory note for $750,000. The transaction is slated to close in July.

With the sale, Ask Jeeves will focus solely on its core search business, which already made up the lion’s share of its revenues, 86 percent.

“For some time now, we have said we have two very different businesses,” said Skip Battle, Ask Jeeves’ chief executive. “The enterprise software market is in a deep freeze. Web properties is where we need to put our focus.”

Jeeves Solutions had acted as a drag on results. While the Web properties side of the business nearly doubled from the year earlier in the first quarter, Jeeves Solutions’ revenues contracted by 32 percent. Ask Jeeves said it expected the market for enterprise software to remain a drag, with revenues falling even further in the second quarter.

In a separate move that could mean more activity in the fast-consolidating search sector, Ask Jeeves said it planned to sell $100 million of convertible notes, bringing its cash supply to $140 million. The company said the proceeds could be used for acquisitions.

Ask Jeeves also upped its earnings guidance, saying it now expected revenues of $23.5 million and pro forma earnings of 7 cents a share. This is an increase from the $22.5 million and 5 cents a share previously forecast.

Ask Jeeves said it would earmark an extra $1 million to marketing this year, after returning to advertising earlier this year with a pair of outdoor ad campaigns. The new commitment will brings its marketing spending for the year to $4 million, Battle said.

Ask Jeeves has benefited greatly from the booming market for search, particularly through its partnership with Google for paid listings. In the first quarter, paid placement, which includes its Google partnership, paid inclusion, and other search-advertising options, grew 71 percent from a year earlier.