Digital River Acquires

Despite a stock price that has lost more than half its value in two days,
e-commerce outsourcing company Digital River Inc. said it has acquired
certain assets and related liabilities of shopping cart and payments company as it continues a push into the SME market.

Minneapolis-based Digital River, which saw its stock
close Tuesday at $6.82 after trading last Friday at more than $14, said the
acquisition is expected to be neutral to earnings in the first quarter and
accretive to earnings starting in the second quarter of 2002. was acquired from a subsidiary of Innuity Inc., a privately held provider of
e-commerce services to small businesses and channel partners that also is
based in the Minneapolis area.

Financial specifics of the cash deal were not disclosed. Digital said that as
a result of the acquisition, Digital River is adding over 11,000 small and
medium enterprise sites to the more than 21,000 sites the company currently

Bear Stearns lowered its rating for Digital River to “neutral” from “buy” on
Tuesday and cut its price target to $8 from $18. On Monday the
stock was downgraded
by Deutsch Bank Alex. Brown after the company
lowered its guidance
last Friday from 7 cents a share to 1 to 2 cents a
share on a pro forma basis for the first quarter.

“This acquisition is a continuation of our strategy to build critical mass in
the SME market, adding thousands of clients to Digital River’s e-commerce
platform,” said CEO Joel Ronning. “…this is a business model that works
because it’s built to scale and it’s based on an outsourcing proposition that
makes strong financial sense.”

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