Sandpiper Networks to Merge With Digital Island in $1.1-Billion Deal
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Sandpiper Networks of Thousand Oaks agreed to merge with Digital Island on Monday in a $1.1-billion stock deal to create a global computer network designed specifically for electronic commerce applications.
Sandpiper’s flagship Footprint service enables Web sites to bypass Internet traffic jams and distribute their content more efficiently over a private network of computers whose capacity is strictly controlled. San Francisco-based Digital Island provides Web hosting, network management and other Internet services to Web businesses serving global markets.
Together, analysts said, the companies’ technologies would create a members-only backbone network for e-commerce that is faster and more reliable than the unenhanced Internet, which is shared by 200 million users.
“People who are doing a significant amount of international business need this,” said Peter Christy, vice president with Internet Research Group, a market research firm in Los Altos, Calif., that focuses on Internet infrastructure. “The potential for internationalization [of e-commerce] is huge. Solving it depends on this kind of innovative system.”
Investors agreed. Digital Island’s shares shot up 68%, rising $15.69 to close at $38.69 in Nasdaq trading Monday.
Digital Island would trade 1.07 shares of its stock for each of the 27 million privately held shares of Sandpiper.
Digital President and Chief Executive Ruann Ernst would remain chief executive of the combined company, which would keep Digital Island’s name and its San Francisco headquarters. Sandpiper’s president and chief executive, Leo Spiegel, would become Digital Island’s president.
All of Sandpiper’s nearly 100 employees would keep their jobs in Thousand Oaks, Spiegel said. All of them hold Sandpiper stock options, which they would be able to cash in for a healthy profit after the deal closes late this year or early next, he said.
Digital Island recently rolled out its own network for distributing Internet content. But with customers clamoring for more capacity, the fastest way to meet the demand was to merge with Sandpiper, Ernst said.
The combined company’s network would include 1,200 computer servers in 21 countries and serve more than 100 customers, including Cisco Systems, E-Trade and Microsoft.
