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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
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Date of Report (Date of earliest event reported):
January 12, 2000
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Digex, Inc.
(Exact name of registrant as specified in its charter)
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Delaware 59-3582217
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
0-26873
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(Commission File Number)
One Digex Plaza
Beltsville, MD 20705
(Address of principal executive offices)
(240) 264-2000
(Telephone Number)
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ITEM 5. Other Events
Compaq Computer Corporation, Digex, Inc. and Microsoft today announced a joint
effort to develop, deliver and market a suite of new, high-performance
application hosting services based on servers and storage and Microsoft products
and platforms to be managed at Digex SmartCenter/(sm)/ data centers. Microsoft
and Compaq will each invest $50 million in Digex to fund the development,
deployment and promotion of the new services. In exchange for their investment,
each will receive $50 million of convertible preferred stock of Digex having a
conversion price equal to $68.40 per share. No dividends will be payable on the
convertible preferred stock. Instead, Compaq and Microsoft will each receive
three-year warrants to purchase 532,500 shares of Class A Common Stock of Digex
exercisable at $57.00 per share.
Application Service Providers (ASPs) want the most robust, reliable
infrastructure that can be deployed quickly, run continuously, scale rapidly and
be easily managed. The agreement will increase Digex's capabilities to more
rapidly and predictably install, manage and upgrade large volumes of servers for
application hosting customers, while also making it signficantly easier for
Microsoft(R) Independent Software Vendors (ISVs) and application developers to
"ASP-enable" existing and new Windows(R) operating system-based applications.
New services, created by Digex through this joint effort will benefit ASPs,
rapidly growing Dot.Coms, and Internet businesses by providing a faster, more
reliable and lower cost method of software delivery over the Internet.
To accelerate time-to-market for software delivery over the Internet, the
agreement will develop and deliver a Digex branded and managed platform focused
on high-quality, consistent implementation of ASP solutions available anytime,
anywhere over the Internet. Goals for the joint effort include providing a
"dial-tone" level of quality unprecedented in traditional and Internet computing
environments and designing the platforms to scale for the growth in online
services in the future. This will provide ASPs with the tools to maximize the
availability, manageability and ongoing maintenance of large volume Web and
application servers. ASPs will benefit from up-to-date, actionable information
via standardized XML datasets and interfaces to their order, incident tracking,
security and billing status information.
"Compaq's intent is to provide our customers with the best Internet
infrastructure, solutions and services through best-in-class industry
partnerships," said Enrico Pesatori, Senior Vice President and Group General
Manager, Enterprise Solutions and Services Group, Compaq Computer Corporation.
"Service Providers and their customers
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are asking for a robust infrastructure that can be deployed quickly, run
continuously, scale rapidly to meet demand, and is easy to manage. By enabling
Service Providers with the ability to deploy applications rapidly on tested
Compaq ProLiant Server and Compaq StorageWorks platforms, we are providing them
with a safe, secure, and proven way to meet their customers' service level
agreements."
"The investment by Microsoft and Compaq further positions Digex at the
leading edge of the ASP revolution" said Mark Shull, president and CEO of Digex.
"At Digex we have a clear vision of how the Internet operating environment of
the future will evolve. As the largest Windows NT-based hosting company in the
world and through this agreement, Digex intends to bring together the experience
and partners required to solve the operational and distribution challenges faced
in scaling the Internet to become the primary business platform for enterprises
of all sizes. The Compaq, Digex and Microsoft initiative is a significant step
forward in bringing this vision to reality by combining skills in hardware,
application platforms, operating system, web and business software and managed
hosting. Together we intend to transform the way business is conducted over the
Internet in a hosted environment."
"Compaq, Digex and Microsoft are at the epicenter of the new ASP
revolution, driving the Internet to become the delivery platform for software
and services," said Jeff Raikes, group vice president, Microsoft. "Microsoft is
excited to work with Compaq and Digex to bring the full benefits of our reliable
and scalable Windows DNA platforms, including Windows 2000 and SQL Server, to
Digex's innovative ASP services."
ASP Platform and Services Defined
Digex will package a number of innovative services, targeted for
introduction towards the end of this year, which will enable ASPs to more
reliably and predictably grow their Web-based service offerings. As part of the
agreement, Microsoft and Digex will also jointly develop software interfaces
which are expected to allow developers of Windows based applications to easily
build "ASP ready" functionality such as online provisioning, billing and
incident tracking into their applications. The will be a powerful combination
of integrated new technology, interdependent processes, technical skills and
shared intelligence specifically designed to most
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effectively install, manage and upgrade high volumes of servers for ASPs and
would include the following key components:
. ASP Server Platform - This component will advance automated provisioning
and configuration of Internet-ready servers based on Microsoft Windows
2000 and Compaq enterprise-class servers, advancements in server resource
monitoring and data management for improved reliability and recovery, and
integrated administration and security tools.
. ASP Application Platforms - These will include hardened, tested, version-
controlled, software packaging based on Microsoft technology and designed
specifically for commerce, messaging, and office applications, for use on
top of the ASP Server Platform.
. ASP Partner Interfaces - These standardized software interfaces,
leveraging the XML and BizTalk(TM) frameworks of the Windows DNA
platform, will allow sharing of critical business and server resource
information to enable an ASP with up-to-date, actionable information, to
become a "one-stop shop" providing their customers with a single-point of
contact. This will provide an easy mechanism for Microsoft ISVs and
application developers to ASP-enable their applications.
. ASP Solution Certification - The world-class technology laboratory
planned for development at the Digex center in Beltsville, MD, will be
used to continuously optimize, tune and test ASP solutions for
scalability, security and performance on the Internet.
GartnerGroup's October1999 release on the application hosting market
projects worldwide ASP services revenue to grow from $889 million in 1998 to
$22.7 billion in 2003. Gartner also states that "the new ASP model incorporates
infrastructure, implementation, and management services into one bundled,
monthly price point where software licenses are sometimes included."
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Statements set forth above regarding expected financial results and other
planned events are forward-looking statements, subject to uncertainties and
risks, including, but not limited to, the demand for Digex's services and the
ability of Digex to successfully implement its strategies, each of which may be
impacted, among other things, by economic, competitive or regulatory conditions.
These and other applicable risks are summarized under the caption "Risk Factors"
in the Company's reports and registration statements with the Securities and
Exchange Commission. In particular, readers must understand the alliance
constitutes a research and development project, and there can be no assurance
that any commercially successful products will be developed.
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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 thereunto duly authorized.
Dated: January 12, 2000
DIGEX, INCORPORATED
(Registrant)
/s/ Mark K. Shull
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Mark K. Shull
President and Chief Executive Officer
