Digital Island jumps on patent win

Jan. 2, 2002 4:43 p.m. PT

Digital Island gained more than 15 percent on Wednesday after the company was granted a patent covering its Internet content delivery.

Shares of the company rose $0.72 to $5.47 in early trading. The e-business network company provides hosting, content delivery, intelligent networking, and application services. Its primary rival is Akamai (Nasdaq: AKAM).

The SanFrancisco, Calif.-based company was awarded a patent covering certain aspects of its digital content delivery over the Internet. The Patent and Trademark Office allowed 21 of the claims sought, the company said.

Digital Island officials said that a number of additional claims are still pending in related applications. In addition, the company has related patent applications pending in Europe and other foreign jurisdictions.

The rise in share price is welcome news for the company, which has been trading lower as of late. Last month, Digital Island reported a net loss of $142.5 million, or $1.82 a share, for the quarter ended Dec. 31, in line with the analysts' consensus estimates. Revenue rose to $31.6 million from $7.6 million in the year-ago quarter.

However, Digital Island cut its revenue outlook for 2001 to between $170 million and $175 million from a range of $190 million to $195 million.

The company blamed a number of factors, including a slowing macro economy, reduced revenue from its largest customer, online stock trading service, E-Trade Group, as well as its strategy of reducing smaller, unprofitable customers.