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May 6, 2004

Technology services provider NaviSite (Quote, Chart) moved to significantly expand its managed applications portfolio Thursday when it agreed to acquire in-state neighbor Surebridge for about $54 million in cash and stock.

NaviSite also announced John Gavin, Jr., as chief financial officer, taking the helm from Jim Pluntze, who will be promoted to the new role of senior vice president of finance.

While giants such as IBM (Quote, Chart) and HP (Quote, Chart) tend to service the largest enterprises in the world, NaviSite focuses mostly on the mid-market niche, providing vertically-focused hosting services, site and facility management, and consulting services.

The Andover, Mass.-based concern will buy Bay State neighbor Surebridge of Lexington for its complementary portfolio of managed application and professional services, targeting the mid-market.

Privately-held Surebridge’s staff is known for its expertise in handling the CRM, supply chain management and financial management applications of Microsoft (Quote, Chart) Business Solutions, PeopleSoft (Quote, Chart) and Siebel Systems. (Quote, Chart)

In the deal, NaviSite will acquire the assets of Surebridge in exchange for two promissory notes in the aggregate principal amount of $39.5 million, three million shares of NaviSite common stock and the assumption of certain liabilities at closing. The deal is expected to be consummated later this month.

NaviSite CEO Arthur Becker said in a conference call that Surebridge’s products, technical expertise and partnerships with Microsoft and PeopleSoft, as well as its customer base with contracted and recurring revenue, make the outfit an obvious fit to the NaviSite operational platform. He said NaviSite anticipates SureBridge will add $11 million to its quarterly revenues.

“We believe the combined organization will be well-positioned to become a leader in providing a broad range of application services to mid-sized enterprises,” Becker said, noting that NaviSite will be a $125 million company with more than 1,200 customers if the deal succeeds.

Becker also introduced new CFO Gavin, who will oversee NaviSite’s financial, accounting and SEC reporting functions. Gavin joined NaviSite from Cambridge Technology Partners, where he managed all worldwide financial functions of the company, including Investor Relations activities, information systems and real estate.

NaviSite has been steadily beefing up its portfolio in the last two years, completing five acquisitions of various sizes and persuasions and bundling them into its growing services stack as one operational platform.

Since September 2002 NaviSite has bagged Clearblue Technologies Management, Avasta, Conxion, Interliant and the infrastructure capabilities and expertise of ClearBlue Technologies (including certain assets of COLO.COM).

Assets from those deals included technology for managed applications and hosting environments, content delivery, and electronic software distribution for technology and entertainment verticals.

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