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Digital Island to Acquire Hosting Provider

Digital Island Inc. late Monday sealed a deal to acquire SoftAware Networks Inc. in a combined cash and stock deal valued at about $450 million based on Digital Island's closing price on July 14.

Under the terms of the agreement, Digital Island Inc. has offered about 9.375 million shares and $20 million in cash for the privately held distributed hosting provider. The acquisition is expected to be finalized in the current quarter, which ends Sept. 30.

Digital Island said the combined company will have more than 900 customers worldwide. It plans to integrate SoftAware's QuickResponse Global Server Network with its e-Business Delivery Network, a suite of content delivery, hosting and network services. GSN combines distributed hosting with a high-performance network infrastructure. Digital Island anticipates the acquisition will accelerate its penetration into media and entertainment markets and will play a key role in its build-out of its broadcast-scale streaming media network.

The build-out is a collaborative effort -- announced in June -- with Compaq Computer, Intel and Microsoft to build the Internet's first broadcast-scale streaming media network capable of supporting up to 7.5 million simultaneous streams.

"SoftAware is a pioneer in quick-response hosting that we believe has amassed a tremendous roster of customers, people and technology," said Ruann F. Ernst, chairman and chief executive officer of Digital Island. "The combination is a natural extension of our e-Business Delivery Network, building a larger scale infrastructure that increases our regional presence and improves our participation in key market segments where rich interactive experiences drive customer transactions."

One of those customers is Sega.com. In May, SoftAware Networks agreed to help host and build SegaNet, a high-speed online console gaming network.



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