IBM and Compaq back net investment firm

IBM and Compaq are pumping $50m (£32m) each into Safeguard Scientifics, a specialist in incubating and operating internet infrastructure companies.

The money will be used to acquire emerging infrastructure companies with innovation technologies and business models. IBM and Compaq will benefit from involvement with Safeguard's large network of partner companies, which consists of more than 40 direct holdings and 200 indirect holdings in internet-centric companies.

Henry Blodget, an internet analyst at researcher Merrill Lynch, said: "Safeguard has positioned itself as a leader in internet infrastructure through its network of partner companies and is building critical mass with its group of partner companies."

Safeguard recently announced its move into the infrastructure market as a parallel strategy to its acquisitions in the business-to-business (B2B) market. Pete Musser, Safeguard's chairman and chief executive, said: " Our infrastructure strategy and focus is attractive to those, such as IBM and Compaq, who understand the synergies between B2B and infrastructure."

During the past nine months Safeguard has floated three companies in the infrastructure space, Pac-West Telecomm, US Interactive and Opus 360, as well as Internet Capital Group, whose B2B leadership is complementary to Safeguard's infrastructure strategy.

In April Safeguard raised $475m, which it said it will invest largely in companies that provide web software, network services and communications technology. The company recently raised $375m in a secondary offering in the first week in April, which will be used to fund additional acquisitions and to provide additional working capital.

According to analysts Forrester Research and IDC, the internet infrastructure market will be worth $1.5 trillion by 2003.