Exodus: Buying Its Way to the Top

The word “powerhouse” is used quite liberally. However, in the case of
Exodus Communications ,
the term is definitely appropriate – especially with yesterday’s $6.5
purchase of GlobalCenter. The deal is expected to close in the first
quarter of 2001.

However, being a powerhouse does not guarantee a stable stock price. The
52-week price range on Exodus is $15-1/16 to $89-13/16. Although, even
though Exodus has seen a fall in its stock price, it has not been as
horrendous as many other tech stocks. Currently, Exodus trades at $49-1/8.

Actually, the mega deal between Exodus and GlobalCenter was much expected.
Rumors were rampent for many months.

Exodus and GlobalCenter are huge players in the huge marketplace for Web
hosting services. These services are provided through so-called data
centers. In fact, these facilities are tantamount to what you would see in
a James Bond movie: there are bomb-proof walls, exotic identification
methods (finger print IDs), secret passwords and so on. Obviously,
Corporate America wants its data as safe as possible.

What does Exodus get in the deal? Well, it will become the biggest Web
hosting company, with 32 data centers and a run-rate of $1 billion in
revenues for 2001. In all, there will be 4,000 customers.

While the deal is pricey, Exodus will see economies of scale, as well as
cross-selling of value-added services to GlobalCenter clients. According to
Exodus, the deal will be accretive in 2001.

As the name implies, GlobalCenter has valuable international talent. Then
again, the company is a division of Global Crossing, which has a global
IP-based fiber network of more than 101,000 miles across five continents.

Accordingly, Exodus and Global Crossing have agreed to a 10-year network
services agreement, a joint venture in Asia and a marketing agreement.

But in the topsy-turvey industry of Web hosting, it would not be surprising
to see Exodus as a target for a buyout. It has tremendous scale, high-end
services and a very talented work force. And, with the GiobalCenter deal, it is
now officially a powerhouse in the Web hosting world.