C&W to snatch up Exodus

Battered Web hosting firm Exodus Communications Inc., which filed for Chapter 11 bankruptcy protection in September, has sold most of its assets to U.K. telecoms operator Cable & Wireless PLC for US$575 million and the assumption of about $180 million in liabilities.

The deal is good news for Exodus customers because it ends months of uncertainty and puts Exodus' assets in the hands of a parent with deep pockets, analysts say.

Dan Leichtenschlag, CTO at Sportsline.com, which collocates about 450 servers in three Exodus data centers, says he's pleased with the news.

"It's definitely good to get closure," Leichtenschlag says. "And a company like Cable & Wireless, which is large and has the resources to solve all their problems and continue the high level of service that we've gotten over the last three or four years is obviously a positive thing."

The news marks the end of an era in the hosting market, analysts say, as stand-alone hosting providers face mounting debt and an eroding customer base. Exodus was saddled with $3.5 billion in debt after building a network of 44 data centers. In addition, analysts note, because Exodus did not own any network assets, it spent much of its resources on multiple high-speed connections to its facilities. C&W, with a global Internet network, won't face those expenses.

"The writing has been on the wall for a long time that Internet data center operations as a standalone business doesn't have a whole lot of margin for error," says Joel Yaffe, an analyst at Giga Information Group. "The carriers missed an opportunity, but now they're able to take advantage of their financial resources and buy up assets dirt cheap."

The planned acquisition is the latest grab for C&W, which acquired managed hosting provider Digital Island in May for $350 million. That acquisition added 10 data centers to C&W's 23 existing facilities (eight of which are Web hosting centers). The Exodus purchase, which includes 30 Exodus data centers and some 3,500 customers, "will immediately bring [C&W] into the forefront of the Web hosting industry," says Jay Slattery, an analyst with Technology Business Research.

C&W pegs its deal with Exodus - which includes 4 million square feet of space in 26 data centers in the U.S., two in London and one each in Tokyo and Frankfurt - at $850 million, about $100 million more than the value Exodus announced. C&W spokesman Peter Eustace says the difference exists because "we've included absolutely everything that could come our way as a liability."

It wasn't clear which data centers will remain open after Exodus shuts an undisclosed number of facilities in the coming months.

Rumors circulated earlier this year that C&W was eyeing Exodus before its Digital Island acquisition. Eustace would not comment on those rumors, but acknowledged the delay has put C&W in a better buying position. "What Chapter 11 has allowed us to do is to select the assets that best fit with what we have so that we can create - when the businesses are combined - an optimum portfolio," Eustace says.

Senior Editor Denise Pappalardo contributed to this report.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Jennifer Mears

Computerworld
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?