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Monday, January 15, 2001


State’s Digital
Island shares
taking on water

Hawaii, after pocketing a
$2.15 million profit, has seen
much of its remaining gain evaporate


By Tim Ruel
Star-Bulletin

The state's formerly high-flying investment in Internet firm Digital Island Inc. has slid even further, but a private partnership controlling the shares still believes in the company.

Digital Island The state has about 228,000 shares in Digital Island, today worth $1.06 million based on Friday's close of $4.66 a share.

While the state's stake is up from its initial investment, it is down substantially from a value of nearly $50 million more than a year ago.

The state, through the partnership, initially paid $450,000 in 1997 for 315,000 shares.

The stock, which soared after going public at $10 a share in June 1999, peaked at a closing high of $148 on Dec. 14, 1999.

A month later, when the price had fallen to about $100 a share, the general partner in control of the investment sold 24,400 shares, and gave the state a distribution of $2 million.

By last September, the stock had tumbled to $30 a share, and the partner sold a smaller group of shares to give the state $150,000. That was the last sale, according to Bill Richardson, head of HMS Hawaii Management Partners, the investment's general partner.

Richardson said he still believes Digital Island has growth potential, citing a lack of competitors in the business of delivering audio and video to the Internet.

In 1999, Digital Island moved its headquarters to San Francisco from Honolulu, where it still maintains a substantial presence, including a Bishop Street network operations center.

The state funded its purchase through the Hawaii Strategic Development Corp., an agency that has received $3.6 million in funding from the Legislature since 1994.

Through similar partnerships, the HSDC has funded several companies, ranging from HotU.com Inc., a local start-up that lets students compare class schedules, to an England-based medical research firm Medisys Plc.



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