Web Hoster Exodus At a Crossroads
Depending on whether or not investors and customers have faith in CEO Ellen Hancock and the rest of Exodus Communications management team, they see the Web hoster as on the brink of either disaster or a major turnaround.
Earlier this month, Exodus lowered its revenue projection for 2001 and signaled that it may be open to an acquisition. But most industry watchers think a buyer is unlikely to surface: They believe Exodus is bound to ride out the telecommunications slump on its own.
Exodus woes embody the troubles that have hit all Web hosting companies. Their main customers dot-com companies have all but disappeared from data centers. Exodus pegs its hopes for future growth on managed hosting.
"I have been very optimistic about [managed hosting] before, but the proof is in the pudding, and they have not been winning business as far as I can tell," said Cary Robinson, senior research analyst at U.S. Bancorp Piper Jaffray.
Out of $1.3 billion total revenue this year, 34 percent is expected to come from managed services and 44 percent from server hosting, according to analyst Fred Moran, managing director at Jeffries & Co. Managed services are expected to bring in $446.1 million.
If Exodus ends up trying to sell, its appeal would be limited because of its close relationship with Global Crossing and its heavy debt load and because data center assets arent worth much at present.
"You can buy square footage on the market for nothing," Robinson said.
Some analysts are upbeat about Exodus prospects for survival. They note the company has more chance to be successful recasting itself as an independent, enterprise-oriented Web hosting company than any of its competitors.
"Most people should respect the fact Exodus management have costs under control," said Andrew Schroepfer, president of consultancy Tier 1 Research.