Digital Island
shares soar 68%

The former Hawaii
firm agrees to acquire
Sandpiper Networks

From staff and wire reports

Shares of San Francisco-based Digital Island Inc. shot up 68 percent today after the former Honolulu company said it agreed to acquire privately held Sandpiper Networks Inc. for $1 billion in stock. The deal unites two key players in the emerging market of expediting delivery of Internet content.

Digital Island's stock closed up $15.69 at $38.69 on the Nasdaq stock market as more than 12 million shares changed hands. It traded as high as $39.50.

Digital Island was founded in California in 1995 but moved to Hawaii in 1996 before its business really got started. While based in Honolulu, it developed its private network, providing a fast system outside the regular commercial Internet for businesses that need to move large amounts of data.

The company provides high-speed secure transmission among data centers in a variety of countries, which are linked to local Internet service providers.

Founder Ron Higgins later moved the company back to California but maintains a call center on Oahu.

Sandpiper Networks, based in Thousand Oaks, Calif., is a similar business.

The two companies are part of an emerging service business that avoids data logjams on the Internet.

The combined business will have more than 100 customers, including E*Trade Group Inc., MasterCard, General Electric Co., CNBC, Microsoft Corp. and the Los Angeles Times.

In the transaction, Sandpiper shareholders will exchange their shares, warrants and options for 27 million Digital Island shares, which closed Friday at $23.

Digital Island's stock, which has more than tripled since its initial public offering in June, had revenue of $2.34 million in 1998 and $7.5 million in the first nine months of fiscal 1999.