Exodus Communications - Acquisitions

Acquisitions

Exodus acquired American Information Systems, Cohesive, Arca Systems, and Network-1's professional services division. In December 1999, Exodus acquired Global Online Japan and opened its Tokyo IDC in April 2000. In 2000 Grenville Consulting was acquired 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. When the customer base evaporated the company was left with several very expensive empty buildings.