Here is the complete article from Dow Jones Newswires, originally published yesterday as well as today. It is available to anyone subscribing to Wall St. Journal Interactive.
Digital Island Off 18% Despite Underwriter Buy Ratings
By MARK BOSLET
(This story was originally published Monday.)
PALO ALTO, Calif. -- Shares of several Web hosting companies fell
dramatically in Monday's Nasdaq market selloff - most notably Digital
Island Inc. (ISLD).
The loss in this newly public company came even as two underwriters -
Thomas Weisel Partners LLC and Bear Stearns - went out with buy
ratings. The drop also comes on the heels of powerful earnings last week
from market leader Exodus Communications Inc. (EXDS).
Clearly, the group lost ground because of the broad market retreat that
took the technology-heavy Nasdaq sharply lower.
But a closer look uncovers a fresh concern with high-flying Digital Island.
Despite what were generally favorable research reports from the
underwriters, one analyst came out with a revenue estimate for this year
that was below what had been projected during the company's IPO
roadshow in June, market sources pointed out.
Both analysts were under the projections for next year, said the sources,
who attended the roadshow presentations. The sources said the more
conservative revenue estimates spooked some investors.
In trading Monday, Digital Island shares were off 5 7/16, or 17.5%, to
25 9/16. Volume was light at 804,000 compared with average daily
volume of 2.9 million shares.
In his research report, analyst Jim Linnehan of Thomas Weisel Partners
indicated he saw Digital Island poised for tremendous growth. But he
projected the company would have revenue of $11.3 million in 1999, less
than the nearly $12 million projected during the roadshow and under
estimates that were higher during presentations to private investors early
this year.
Linnehan estimated revenue will climb to $46 million in 2000, and Bear
Stearns analyst James Henry projected $46.1 million. The roadshow
revenue projections for 2000 had been $56 million or greater, the sources
said.
Digital Island shares debuted June 29 at 10 and rose to a high of 40 7/16
on July 7.
A Digital Island spokesman declined to comment. Also lower Monday
were Exodus and competitor AboveNet Communcations Inc. (ABOV).
-By Mark Boslet; 650-496-1366 |
