Stock Watch: Digital Island Gains on Microsoft Deal

Digital Island, Inc. (Nasdaq: ISLD) picked up 1 3/16 to 15 7/16 Monday after the company said its TraceWare application service was licensed by Microsoft Corp. (Nasdaq: MSFT).

San Francisco, California-based Digital Island said Microsoft will use TraceWare to manage digital rights in the distribution of audio and video downloads from the WindowsMedia.com multimedia guide.

TraceWare, the company says, determines with 96 percent accuracy the country in which a Web query originates, without identifying the specific user. The company says its software “responds to a critical need for content providers to control the distribution of intellectual property by region,” as rights may be restricted by location.

“TraceWare helps solve a conundrum for content providers,” said Jonathan Usher, group product manager for Microsoft’s digital media division. “The Internet is global, but distribution rights and customer interests are often regional.”

Usher said Microsoft has used TraceWare in promotions featured at WindowsMedia.com, and the software “integrates smoothly” with Microsoft’s other services.

Digital Island provides hosting, networking and application services aimed at helping businesses conduct e-commerce and other online business. The company’s shares set a 52-week low of just above 12 last week, down from a high of almost 157 last December. The company went public at $10 per share last June.

Digital Island also has high hopes for a streaming media project it is working on with Compaq Computer Corp., Intel Corp. and Microsoft. The deal, announced in June, includes equity investments totaling $45 million from the three tech giants. In announcing the plan, the companies said their network’s reach would be the Internet’s largest, and “roughly comparable” to that of a prime-time TV show.

Separately Monday, CIBC World Markets reportedly began coverage of Digital Island shares with a hold recommendation.

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