Exodus Communications was a high-flying Internet hosting service and Internet service provider to dot-com businesses. It went broke, along with its customers, during the bursting of the dot-com bubble.
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Exodus inception
Exodus was founded in 1992 as Fouress, Inc., and reincorporated in 1994 to Exodus Communications. Exodus Communications was a Global Web Hosting Company in Santa Clara, California. They completed an IPO on the NASDAQ in March 1998, their stock symbol was (NASDAQ: EXDS). The original headquarters was located on Wyatt Drive in Santa Clara, just down the street from the Intel HQ. The final Exodus HQ was at 2831 Mission College Drive in Santa Clara (now Yahoo's HQ).
Executive leadership
K.B. Chandrasekhar served as CEO from inception until September, 2001. In March 1998, Ellen Hancock, a former Vice President at IBM and CTO of Apple Computer, was recruited as President. She assumed the CEO post in September 1998. She resigned September 10, 2001. She was followed by Bill Krause as CEO on September 1, 2001. Regardless of public statements, Mr Krause's employment contract clearly stated that he would be significantly rewarded for taking the company into bankruptcy. He achieved this goal in less than 90 days and was paid a significant bonus for this 90 days of work [1]. Once the Company assets were sold off to Cable and Wireless, Bill Austin took over as the CEO. William R. Yeack, a veteran from Anderson Consulting, was chosen as Executive Vice-President of Managed and Professional Services in 1999 to lead Exodus' hypervelocity growth. Developing 43 fifth-generation data centers, Yeack helped Exodus become famous for owning the largest concentration of servers and switching equipment in the world at the time. Yeack was with Exodus until it went bankrupt.
Product offerings
In-House offerings: Web Hosting (high end - not shared) Colocation Services Network access and Internet Bandwidth Managed Security Services & Consulting For all of the below services Exodus relied on outsourced partners: Managed Backup and Storage Services - Exodus served as the hub for no less than 8 managed storage companies and resold services from at least half Managed Web Hosting - MSP-like turn-key complex hosting offerings including all operational and capital costs in a single price per month Content Distribution Networks (CDN) - In addition to creating ReadyCache (based on non-functioning Inktomi technology), Exodus invested in and sold MirrorImage CDN. However none of these services were ever market leading or even competitive.
Notable highlights
Carried most (essentially all) of the Internet's west coast traffic in the summer of 1996, after a major outage effectively shut down the entire western region Internet. Five stock splits in approximately 12 months One out of every three to four Internet crossing packets traversed the Exodus network, at its peak. Hosted most major websites such as Google, Yahoo!, PayPal, BestBuy, Weather Channel, Merrill Lynch, American Airlines, Microsoft, Hotmail, Dilbert.com, Virgin Mobile, O2 Plc, Geocities, Nextcard, etc. Highly secure data centers with sophisticated physical security technology like weight activated mantraps, biometric access, and explosion resistant 'vaults'. Still holds a NASDAQ record for 13 consecutive quarters of >40% growth.
Corporate culture
At the height of the company, there were approximately 4500 employees & 46 data centers. The headquarters was expanded to build two 8 story towers in addition to the 4 story building. At headquarters, facilities included on-site gym, massage therapists (for a fee), and cafe. The culture was typical of fast-moving companies in that hiring was difficult and responsibilities were often unclear. Decisionmaking was top-down and sometimes characterized as Machiavellian. Sales was the most powerful organization in the company (as evidenced by high cost of sales due to good comp plans), followed by Professional Services (as evidenced by the employee count - about 1/3 of the company).
Acquisitions
Exodus acquired American Information Systems, Cohesive, Arca Systems, and Network-1's professional services division. Exodus acquired 20% of Mirror Image for $637 million and purchased GlobalCenter from Global Crossing for $6.5 billion at the height of the bubble. Exodus paid $75 million in cash and the rest in stock for Mirror Image, and paid the entire amount for Global Crossing in Exodus shares. The subsequent write down in the value of the Mirror Image holding hurt the Exodus balance sheet. The addition of 11 new GlobalCenter data centers to its network worsened cash flow problems. Exodus also acquired KeyLabs Inc. for $47 million. Keylabs was a major leader in computer testing. The lab contained over 4000 computers as well as a large global network which was used for high performance bandwidth and load testing for their customers such as the NYSE and Microsoft. A major element of their failure was due to "Dot-com" customers who failed to pay their bills, resulting in severe cash shortages. Poor financial control of customer credit worthiness, collections and investment justification contributed to the cash crunch as much as declining demand from customers. Another major issue was the overly aggressive footprint expansion effort. Many felt that they should have stopped at 23-27 datacenters, not the 47 or so in service at the peak. When the customer base evaporated the company was left with several very expensive empty buildings.
Chapter 11 bankruptcy
On September 26, 2001 Exodus Communications®, Inc. (NASDAQ:EXDS) announced that it filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The filing will enable Exodus to focus on operating its business and serving its customers while it develops a plan of reorganization to provide a suitable capital structure for long-term growth. The company also announced it had received a commitment for up to $200 million in debtor-in-possession (DIP) financing from GE Capital which will be used to fund post-petition operating expenses and supplier and employee obligations. The company filed its voluntary petition in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The filing includes the company's domestic operations headquartered in Santa Clara, California.
Acquired by Cable and Wireless
November 2001 — Cable and Wireless (USA)- division purchased the bankrupt web hosting/co-location provider Exodus Communications for $800 million dollars. C&W merged its smaller US operation, the previously acquired Digital Island, with the larger Exodus operation and renamed it Cable and Wireless America.
Sold to SAVVIS
In March 2004 Cable and Wireless America, including the Exodus assets, were acquired by SAVVIS.
