Video search gives Autonomy a boost

Autonomy shares surged almost 11 per cent yesterday after the company revealed that demand for its online video searching technology and its other search products has started feeding through to the bottom line.

Autonomy's Virage technology is used to power the blinkx video search engine which is best known for its Chinese operation, the largest video search site in the world. Earlier this week, blinkx signed a contract to supply video search capability to Microsoft, AOL and Lycos. Millions of users will use Autonomy's technology to search for short documentaries, music videos, television reports and other video content.

Internet companies are under pressure to aggregate video content due to the upsurge in consumer usage of video sites such as YouTube, which Google bought for $1.6bn (£864m) earlier this week. Autonomy is largely known for its document-searching technology that is typically used for counter-terrorism purposes and corporate applications but its acquisition of the video search technology provider Virage in 2004 has proved a wise move. It also looks to have benefited from its acquisition of the US rival Verity last year. The $500m deal increased the group's scale and customer base in a fragmented market.

Autonomy said results for the third quarter, historically its weakest period, will beat market expectations for revenue of $58.5m and pre-tax profit of $11.8m. The positive update sent the shares 50.75p higher to 516.75p.

The group also said it has won contracts with the investment bank Merrill Lynch and the Financial Times without revealing financial details.

George O'Connor, an analyst at Shore Capital, said more positive surprises should be expected as Autonomy signs more deals.