C&W Buys Digital Island for $340 Million

Cable & Wireless announced Monday its $340
million buyout of Web hosting company Digital Island.

When the deal is completed in June, Digital Island will be a wholly-owned
subsidiary of the U.K.-based telecommunications giant. The board of
directors at both companies already agreed to the transaction, and assuming
Digital Island’s $49 million debt.

With roughly $9 billion in the bank, the relatively minor investment gives
C&W an instant presence in an area it wasn’t looking to develop for
months: content delivery and eBusiness management.

Digital Island, with an impressive client list that includes America
Online, Inc., Cisco Systems, Inc., Reuters and Universal Music Group, runs
it’s clients content using Footprint, a product that cuts down on the time
it takes for customers to view images, dynamic content and streaming media.

It’s an application many eBusiness company’s are looking for in a provider,
and one that C&W couldn’t afford to overlook for very long.

Graham Wallace, C&W chief executive officer, said the deal is a good match
for both companies.

“The combined company will be able to offer a comprehensive range of
IP/data transport, hosting, content delivery an other value-added services
to business customers in the United States, Europe and Japan,” Wallace
said. “It is an excellent match with our investment criteria of value,
strategic fit and strong management committed to developing the business.”

According to C&W officials, once the two companies have combined
operations, the company will support more than $1 billion in daily
transactions for companies like IBM, FT.com, Cisco, Microsoft and Yahoo!
Europe. The company will also boast more than one million square feet of
Web hosting space across North America, Europe and Asia.

In addition to content delivery, C&W can now provide a more impressive
array of value-add services for its clientele. Services such as virtual
private networking, pay-to-download, subscription-based Web sites and
application services strengthen the company’s business model.

Both companies expect to make significant revenue by cross-selling products
and services to each other’s customer base.

The acquisition also bolsters the carrier’s Web hosting presence in the
U.S., which has lagged behind in growth compared to Europe and
Japan. Analysts expect Monday’s announcement to be the first of several
announcements this year targeted at increasing C&W’s Web hosting footprint.

Chad Couser, C&W spokesperson, wouldn’t confirm or deny that opinion,
saying only “we continue to look at opportunities as they arrive. In
today’s market, there are a lot of good deals out there.”

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