Digital Island Gains on Profit Forecast

Digital Island, Inc. (Nasdaq: ISLD) was at US$6.56, up 56 cents, after the company, having pared its spending plans, said it expects to break even before extraordinary items two quarters earlier than previously thought.

The San Francisco, California-based Web hosting company said it will move into the black — before income taxes, depreciation and amortization — in the third quarter ending in June 2002.

By cutting back on capital spending, the company said, it has ensured that it has enough cash to fund operations until then.

“These changes reflect the alignment of the company’s strategy as it transitions from aggressive infrastructure build-out to profitable growth,” Digital Island chairman, president and chief executive officer Ruann F. Ernst said. “We are confident in our ability to execute this revised plan and raise strategic capital to close the remaining funding gap.”

Digital Island said it lowered its planned capital spending for fiscal 2001 to $225 million from $300 million.

The company said revenue for the first quarter ended December 31st totaled $31.6 million, up from $7.6 million in the year-earlier quarter. The loss before income taxes, depreciation and amortization widened to $53.8 million, or 69 cents per share, from $20.1 million, or 55 cents. After charges, the company lost $142.5 million, or $1.82 per share.

For the second quarter, the company expects a 15 percent sequential increase in revenue to more than $36 million, along with a loss before income taxes, depreciation and amortization of $51 million, or $1.92 per share.

Capital spending for the quarter will total $75 million to $85 million, most of which will fund data-center operations and the “expansion and continued deployment of edge servers,” Digital Island said.

For the fiscal year ending in September, the company predicts revenue of $170 million to $175 million, with a loss per share of about $7.45.

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