Exodus Files for Chapter 11 Bankruptcy Protection

As expected, troubled Web hosting firm Exodus Communications Inc. filed for voluntary Chapter 11 bankruptcy protection today.

The Santa Clara, Calif., company, considered a prince of the IT community a year ago, has been plagued by numerous financial problems, including more than $3 billion in debt, multiple rounds of layoffs, a plummeting stock price and market cap, and mass customer churn. Following numerous executive-level shifts, CEO Ellen Hancock resigned last month.

Through a press release, new Chairman and CEO L . William Krause said the companys "restructuring," which includes $200 million from GE Capital, will not interrupt user services and that new financing is actively being sought. Like his predecessor, he acknowledged the companys mistakes, such as relying too much on dot-com business and investing too quickly in expensive data centers, which have gone from having waiting lists to being half-empty.

"How they dress this one up is going to be very interesting. Bankruptcy can mean a lot of different things," industry analyst Dana Tardelli, of Bostons Aberdeen Group Inc., said Tuesday before Exodus announcement. "Its going to be exciting, the reverberations throughout the industry, how this plays out, what happens to customers, how they react. You can die gracefully or you can screw everybody; thats what really remains to be seen here."

Rumors of potential buyers have included Electronic Data Systems Corp., SBC Communications Inc., Sprint Corp., IBM and Global Crossing Holdings Ltd.