LONDON -- It's not often that well-regarded European software companies like

Autonomy Corporation

(AUTN)

appear on the U.S. markets. On the rare occasions that they do, you can be sure of having to pay through the nose for them.

On Wednesday, Autonomy -- a U.K. provider of Internet software that automates categorization, tagging and hyperlinking of large volumes of unstructured content -- offered 2.2 million ordinary shares in the form of American depositary shares at $124 a pop, slightly below Tuesday's closing price of 124.50 on the

Easdaq

. By midday, the shares were trading on the

Nasdaq Composite Index

down a little at 123, not bad considering that the overall market is off about 5%.

The company is, in the words of one fund manager, "top quality." Rather than language, its products are built around an algorithm that analyzes text for concepts. This is a fundamentally different approach to knowledge management than that taken by other companies, such as

AskJeeves

(ASKJ)

and

Inktomi

(INKT)

.

"The fact its technology is based on mathematics rather than language is key, because it transcends regions," says Chris Bell, lead manager of

Framlington's NetNet

fund, which has $500 million invested in global Internet related stocks, including Autonomy.

Certainly a number of companies, increasingly those in the U.S., like what Autonomy is producing. U.S. customers include

General Motors

(GM) - Get Report

,

Sun Microsystems

(SUNW) - Get Report

,

Halliburton

(HAL) - Get Report

and

Novartis

. Original equipment manufacturer, or OEM, partners include

Sybase

(SYBS)

and

FileNet

(FILE)

.

Autonomy is also benefiting from the increasing size of the market for its products.

Lucent

recently put out a report saying that the amount of unstructured text -- content from a variety of sources and on different subjects -- on the Web is doubling every month. Also, the advent of mobile phone services allowing users to surf the Internet on them means that there is a greater need for such artificial intelligence software. Autonomy recently launched its product iWAP for this segment of the market.

The result of all this can be seen in the 212% increase in Autonomy's revenues in 1999 to

5.6 million and, inevitably, a 161% rise in the stock price so far this year.

And here's the rub. With expected revenue of

30 million ($46.2 million) this year, the stock is trading at a multiple of around 110 times.

Autonomy's undoubted success "would seem to have caused some over-enthusiasm on investors' side," says Ville Vuonokari, analyst at

Quartz Capital Partners

in London. "Some have even called the company a 'new Microsoft,' whatever that might mean." Vuonokari has a sell rating on the stock. Quartz has not performed any underwriting services for the company.

Likewise, Derek Brown, a senior research analyst at

Robertson Stephens

, has a long-term-attractive rating on the stock because he is unsure whether the company can maintain its rating in the U.S. -- where the valuations of its competitors such as AskJeeves are so much lower. Robertson Stephens has provided investment banking services to Autonomy within the past three years.

"Buyers of Autonomy like the story because they focus on the uniqueness of it," explains Brown. "But all the players in this field are unique because they all have different approaches. Just because Autonomy bases its products on mathematics, it does not necessarily mean it will become the standard."

Investors like Framlington's Bell agree that the valuation is high, but considering that the stock is off its peak of 218 the valuation is not as eye watering as it has been.

"I'd buy it at $124," says Bell. "Actually, that's exactly what I have been doing," he adds, proving that there will always be some investors willing to pay though the nose for quality.