Exodus Communications

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Exodus Communications was an 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. It declared Chapter 11 bankruptcy in 2001 and was purchased by Cable and Wireless in November of 2001.

1 Exodus inception
2 Executive leadership
3 Product offerings
4 Notable highlights
5 Corporate culture
6 Acquisitions
7 Chapter 11 bankruptcy
8 Acquired by Cable and Wireless
9 Sold to SAVVIS
10 References

[edit] Exodus inception

Exodus was founded by K.B. Chandrasekhar and B.V. Jagadeesh in 1994. Fouress, Inc., a consulting company that was founded by Chandrasekhar and Jagadeesh founded Exodus in 1996. Fouress then merged into Exodus Communications in 1994. 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 Benicia Ave in Sunnyvale, California. The final Exodus HQ was at 2831 Mission College Drive in Santa Clara, (now Yahoo's HQ).

[edit] Executive leadership

K.B. Chandrasekhar served as CEO from inception until September, 1998. He was the Chairman until September 2000. B.V. Jagadeesh served as VP Engineering and CTO from inception until July 2000

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.^{[citation needed]} 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.

Sam Mohammad was the Vice President of Sales since early 1997 and grew the revenues from 2M to over a billion dollars in 5 years. Richard 'Dick' Stoltz was CFO since 1995. Bob Sanford became VP Operations in 1997. There were other key members of the team such as Barry James Folsom who was consultant VP Marketing - one of the key folks who helped set the direction in 1997. Robert Bowman helped build the backbone. Prabakar Sundarajan was responsible for Managed Services. Both Prabakar and Rob Bowman joined the company in 1995.

A key advisor, early investor and board member was Peter A. Howley. While lecturing at Stanford University on "The Centex Story", he was approached and quickly recruited by Exodus CEO Chandrasekhar. Howley was Co-founder/CEO of Centex Telemanagement (CNTX), a legendary company in telecom.. As a management consultant to top management and the board Howley provided critical advice. These initially included actions to immediately accelerate revenue and customer growth, as well as steps to building a great service and customer oriented company. He envisioned Exodus as the EDS of the Internet world. He served from Exodus's earliest days until he resigned from the board in June, 2000.

[edit] Product offerings

In-House offerings:

Web Hosting (high end - not shared)
Colocation Services
Network access and Internet Bandwidth
Managed Security Services and Consulting
Network Storage Solutions

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.

[edit] Notable highlights

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Exodus carried most (essentially all) of West Coast's Internet traffic in the summer of 1996, after a major outage effectively shut down the entire western region Internet.

It had four stock splits in approximately 18 months

Two of every three to four Internet crossing packets traversed the Exodus network, at its peak.

Hosted most major websites such as Google, eBay, 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'.

Exodus Market Cap Peaked ~32 Billion USD

Exodus still holds a NASDAQ record for 13 consecutive quarters of >40% growth.

[edit] Corporate culture

At the height of the company, there were approximately 4500 employees and 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. Decision making 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 commensurate compensation), followed by Professional Services (as evidenced by the employee count - about 1/3 of the company).

[edit] Acquisitions

Exodus acquired American Information Systems, Cohesive, Arca Systems, and Network-1's professional services division. In 2000, Exodus acquired Grenville Consulting to expand its UK Professional Services capability.

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.^{[citation needed]} When the customer base evaporated the company was left with several very expensive empty buildings.

[edit] Chapter 11 bankruptcy

On September 26, 2001 Exodus Communications, Inc. announced that it filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.^{[citation needed]} 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.

[edit] 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.^{[citation needed]}