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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 8, 1999
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Digital Island, Inc.
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(Exact name of registrant as specified in charter)
Delaware 000-26283 680322824
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
45 Fremont Street, Suite 1200, San Francisco, California 94105
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 738-4100
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5 OTHER EVENTS
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On December 7, 1999, Digital Island entered into a memoranda of
understanding with Sun Microsystems, Inc. and Inktomi Corporation providing for
a joint strategic relationship. Under the relationship, Digital Island has
agreed to purchase, over a two year period, up to $150 million of Sun servers,
storage operating systems and server software, using Inktomi network caching
applications. The total purchase would consist of 5,000 Sun servers. Sun and
Inktomi also agreed to participate and invest in joint marketing and sales
activities with Digital Island to support broadband and streaming media content
delivery over the Internet. Sun agreed to provide $100 million of lease
financing for the acquisition of the equipment, consisting of:
. a $30 million initial line of credit,
. a $30 million line of credit available in nine months upon meeting
certain working capital maintenance and financing milestones, and
. a $40 million line of credit available in fifteen months upon
meeting certain additional working capital maintenance and financing
milestones.
For extending this lease financing, Digital Island agreed to grant
Sun warrants to purchase up to $10 million of Digital Island Common Stock in
three tranches corresponding on a pro rata basis with the above three lines of
credit; the warrants will be exercisable at the five-day average trading price
preceding the grant dates, and will expire in 48 months (in the case of the
first warrant) and 36 months (in the case of the second and third warrant). The
lease financing facility and the marketing and sales alliance are subject, in
part, to definitive documentation.
In connection with the alliance, Sun has agreed to make a $20 million
investment, and Inktomi has agreed to make a $6 million investment, in Digital
Island common stock at a price per share equal to the lesser of the average
closing price of the common stock as quoted on the Nasdaq National Market for
the ten trading days before December 7, 1999 or for the five trading days before
the closing of the investment. Sun and Inktomi have agreed to not sell or
otherwise dispose of such shares until the first anniversary of their purchase.
The Sun investment is conditioned, among other things, upon customary
governmental approvals and the Inktomi investment is conditioned upon
consummation of the Sun investment.
Attached and incorporated herein by reference in its entirety as
Exhibit 99.1 is a copy of the press release dated December 8, 1999 announcing
the strategic alliance.
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits. The following documents are filed as an exhibit to
this report:
99.1 Press Release, dated December 8, 1999, issued by the
Company announcing the strategic alliance with Sun
Microsystems and Inktomi.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Digital Island,
(Registrant)
Date: December 9, 1999 By: /s/ T.L. Thompson
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T.L. Thompson
Chief Financial Officer and Secretary
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EXHIBITS INDEX
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Exhibit Description
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99.1 Press Release, dated December 8, 1999, issued by the Company
announcing the strategic alliance with Sun Microsystems and
Inktomi.
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EXHIBIT 99.1
DIGITAL ISLAND ALLIES WITH SUN AND INKTOMI TO EXPAND GLOBAL ELECTRONIC
BUSINESS CONTENT DELIVERY NETWORK
Digital Island to Invest up to $150 Million to Deploy 5,000 Sun Servers
Running the Inktomi Traffic Server(TM) Cache Platform
Sun and Inktomi to Make Investments in Digital Island
SAN FRANCISCO, December 8, 1999 - Digital Island, Inc., Sun Microsystems,
Inc., and Inktomi Corp. announced today an agreement intended to greatly
accelerate Web-site performance for consumers and e-Business Web sites. Under
the agreement, Digital Island will deploy up to 5,000 Sun servers equipped
with Inktomi's Traffic Server and Content Delivery Suite - transforming the
Internet into a fast, reliable and rich infrastructure capable of supporting
the demands of interactive e-Business.
The build-out is expected to be among the largest deployment of carrier-grade
servers at the outer edges of the Internet. Digital Island expects to invest
up to $150 million to extend the reach and expand the capacity of its existing
e-Business Content Delivery Network, which currently consists of regionally
located data centers, over 1,200 Sun- and Inktomi-based content distribution
sites, and an intelligent network spanning 21 countries - all designed to
provide a superior interactive end-user experience anywhere in the world.
Under the agreement, Sun will also make, as part of its new Sun Equity
Investment Portfolio, a minority equity investment in Digital Island. Inktomi
will also make an additional investment in Digital Island, adding to the stake
it already holds in Sandpiper Networks, which announced a merger agreement
with Digital Island in October 1999. The Sun investment is subject to
customary governmental approvals.
Over the next three years, the companies will add up
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to 5,000 of Sun's Netra(TM) t1 carrier-grade servers and Enterprise(TM) 420R
servers running the Solaris(TM) Operating Environment. The servers will be
running the Inktomi Traffic Server network cache platform and Content Delivery
Suite. These products will be incorporated into Digital Island's existing
network of 1,200 carrier-grade servers running Sandpiper's Footprint
algorithm, which transparently directs end users to the best performing site
on the network. Approximately 350 metropolitan areas are expected to be
targeted for the deployment of the carrier-grade Sun servers over the next
three years, 250 of which are expected to be outside the United States.
Digital Island, Sun and Inktomi will target network service providers (NSPs)
worldwide for co-location of the new servers through joint marketing and
channel programs. These servers will support interactive services over a
variety of access methods including DSL, cable, wireless and dialup. The
benefits to NSPs of co-locating the servers include:
. Reduced network backbone and peering costs by keeping
content on their network.
. Increased attraction and retention of new subscribers through
faster and more reliable end-user experience. In part, the
performance gains are realized through the elimination of
network bottlenecks and closer proximity of content to the end
users.
. Increased revenue generation through participation in Digital
Island's innovative revenue sharing and resale programs.
. Additional revenues through building value-added content
delivery services such as rich streaming media, ad insertion,
mobile device support, secure e-Business transactions and
dynamic content, by leveraging the open Application Programming
Interface (API) and related software development tools for
managing applications distributed on the e-Business Content
Delivery Network.
"The innovative network services that our alliance brings to the Internet
allows corporations to rapidly deliver content and conduct secure transactions
in order to excel at all facets of e-Business," said Ruann F. Ernst, president
and CEO of Digital Island. "The network of the future is here."
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"Digital Island is a great example of Sun's vision for distributed computing,"
said Ed Zander, president and COO of Sun Microsystems. "The combination of
Digital Island's world-class network with Sun's carrier-grade servers and
software create a formidable platform for deploying e-Business services - a
platform that is reliable, with the flexibility to handle all data types, and
performance to match the brick-and-mortar world, if not surpass it, for
conducting transactions."
"Inktomi's expanded strategic agreement with Digital Island represents an
important advance in our mission to scale the Internet, and further
establishes Traffic Server as the de facto network cache standard," said David
Peterschmidt, president and CEO of Inktomi. "The combination of Sun's powerful
servers, Digital Island's sophisticated global network, and Inktomi's
infrastructure software creates an incredible platform to help businesses
aggressively leverage the Internet."
COMPANY INFORMATION
Digital Island(R) (NASDAQ: ISLD) is a leading provider of network services for
globalizing e-Business applications. Digital Island serves companies that need
to securely and consistently extend business-critical applications for
marketing, selling, supporting, or distributing products via the Internet.
Digital Island's e-Network Services include global content distribution and
hosting services, localization of the end user online experience and a
reliable global Intelligent Network, all of which are designed to deliver the
right content, to the right customer, in the right market, at the right time.
The Company has regional data centers in New York, Santa Clara, Honolulu,
London, and Hong Kong, connecting directly into 21 countries with Local
Content Managers in 13 markets worldwide to provide the ubiquity and reach of
the public Internet with the quality and functionality normally available only
in a corporate wide-area network. www.digitalisland.net.
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Based in Foster City, Calif., Inktomi (pronounced INK tuh me)
(NASDAQ: INKT) develops and markets scalable software designed
for the world's largest Internet infrastructure and media companies.
Inktomi's portal services include the search, directory, and shopping
engine applications; network products include the Traffic Server
network cache platform, Content
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Delivery Suite, and associated value-added service applications. CNET,
Excite@Home, Intel, Microsoft, RealNetworks, Sun Microsystems and Yahoo! The
company has offices in North America, Asia, and Europe. www.inktomi.com.
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Since its inception in 1982, a singular vision - "The Network Is The
Computer(TM)" - has propelled Sun Microsystems, Inc. (NASDAQ:
SUNW) to its position as a leading provider of industrial-strength
hardware, software and services that power the Internet and allow
companies worldwide to ".com" their businesses. With $12.4 billion in
annual revenues, Sun can be found in more than 170 countries and on
the World Wide Web at www.sun.com.
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Important Notice
Digital Island is a registered trademark of Digital Island, Inc. All other
trademarks are properties of their respective owners.
This release may contain forward-looking statements that involve risks and
uncertainties. Important factors which could cause actual results to differ
materially from those in the forward-looking statements, include but are not
limited to: the Digital Island's short operating history which makes it
difficult to predict its future results of operations; the company's history
of operating losses and expected future losses which could impede its ability
to address the risks and difficulties encountered by companies in new and
rapidly evolving markets; the company's future operating results could
fluctuate which may cause volatility or a decline in the price of the
company's stock; the company may not be able to price its services above the
overall cost of bandwidth causing its financial results to suffer; and other
factors detailed in the company's filings with the Securities and Exchange
Commission including its recent filing on Form S-1.
Sun, the Sun logo, Sun Microsystems, Sun Netra, Sun Enterprise, Solaris,
HotJava and The Network Is The Computer are trademarks or registered
trademarks of Sun Microsystems, Inc. in the United States and in other
countries. Press announcements and other information about Sun Microsystems
are available on the Internet via the World WideWeb using a tool such as
Netscape Navigator or Sun's HotJava browser. Type http://www.sun.com at URL
prompt.
Copyright (C) 1999 INKTOMI CORPORATION. All Rights Reserved. Inktomi, Traffic
Server, Scaling the Internet and the tri-colored cube logo are all trademarks or
registered trademarks of Inktomi Corporation. All other company and product
names referenced herein are the trademarks or registered trademarks of their
respective holders.
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MEDIA CONTACTS:
Digital Island:
Irwin Greenstein
415/738-4162
[email protected]
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Inktomi:
Julie Keslik
650/653-3074
[email protected]
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Sun Microsystems:
Maria Villarino
650/786-3205
[email protected]
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