Stock Watch: Digital Island Sinks on Wider Loss, Acquisition Plan

Digital Island, Inc. (Nasdaq: ISLD) fell 6 9/16 to 38 1/16 Tuesday after reporting a wider loss for the third quarter ended June 30th, and announcing plans to acquire a startup business.

The San Francisco, California-based Digital Island said third-quarter revenue rose to $16.1 million from $3.7 million in the year-earlier quarter, while its loss before taxes and items widened to $100.2 million, or $1.51 per share, from $14.1 million, or $3.96.

“Market demand for Digital Island services accelerated in the third quarter,” said Chairman and Chief Executive Officer Ruann F. Ernst. The company added 113 new recurring customers during the quarter, including UBS Warburg, she said.

The company also said it will buy hosting company SoftAware Networks, Inc. for about $450 million in cash and stock, giving it a total of 900 customers worldwide. Analyst Cynthia Houlton at Dain Rauscher Wessels reportedly downgraded the stock to buy from strong buy, citing widening losses due to an aggressive acquisition strategy.

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