Digital Island Inc has agreed to merge with content delivery network company Sandpiper Networks Inc. The deal shakes up the content delivery and hosting markets, two of the big growth areas of 1999. It’s only a few weeks since Digital Island announced its TraceWare intelligent network service, able to identify the country of origin of any network user. Add that to Sandpiper’s Footprint distributed caching service and you get a combination executives hope will be an unmatched platform for global e- business applications. When the merger is complete, the combined network will include 1,200 enterprise-class servers in 21 countries with five regional data centers. It should be able to handle web-based marketing, sales, fulfillment and support worldwide. Integration shouldn’t be too onerous a chore: both companies run Inktomi caching and mirroring software on Sun Microsystems hardware with streaming media from Microsoft and RealNetworks and publishing and content management courtesy of Vignette.
Even better, executives report that there’s very little overlap between the two customer pools, meaning that cross-selling opportunities abound. Sandpiper CEO Leo Spiegel estimated the market opportunity for the combined companies at $10 to $20bn. Sandpiper’s shareholders will receive 1.07 shares of Digital Island for each share, warrant or option in Sandpiper. When the merger was announced, this came to about $630m, but Digital Island’s shares soared on the news and by close of trade, Sandpiper was worth a billion on paper, with Digital Island valued at over $2bn. Ruann Ernst, president and CEO of Digital Island, will be the CEO of the combined company, with Spiegel becoming the president. The combined company will be headquartered in San Francisco.
