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Cable & Wireless said on Friday that it had entered into a conditional contract with Exodus Communications to acquire selected assets and a majority of the business activities of Exodus. This includes all of Exodus US, Japanese and European customer contracts, together with selected corporate and data centre assets, intellectual property (including the Exodus brand), its employees and other unspecified resources.
The data centre assets include 26 of Exodus' 44 operational data centres plus four other fully fitted-out centres. Of these 30 data centres, 26 are in the US, two are in London and the remainder are in Tokyo and Frankfurt.
It is not yet known, however, how the deal will impact on Exodus' Irish operations. As of May, 2001, Exodus employed 15 people in a response centre in Dublin. The company had also planned to complete the construction of a 100,000 square foot Internet date centre in the capital for Global Crossing, but construction of the facility was never confirmed and in the summer Exodus said it wouldn't be going ahead with the project until it could better understand its needs throughout Europe.
A Cable & Wireless spokesperson told ElectricNews.Net that matters regarding Exodus employees had yet to be decided and added that it couldn't comment on the fate of the Exodus data centres which it wasn't buying. A spokesperson for Exodus was not available for comment at the time of going to press.
Cable & Wireless said that the purchase would increase traffic for the Cable & Wireless network, particularly in the US, and increase savings from economies of scale. According to Chief Executive Graham Wallace, the deal will give the company a quarter of the market for Web hosting in the US and globally.
In a statement Wallace said that combining Cable & Wireless' strength with the scale and scope of Exodus' offering and customer base would create a unique offering in managed hosting and interactive Web services for enterprise customers.
However, Cable & Wireless said that an additional USD250 million investment would be needed to take the Exodus operations to cash flow break-even. Cable & Wireless said it expected these operations to become earnings before interest, tax, depreciation and amortisation positive during 2003 and to contribute positively to earnings per share and free cash flow in the financial year ending March 31, 2005.
But this is not yet a done deal. Because Exodus sought Chapter 11 protection from creditors the purchase will need the approval of the US courts and other companies are allowed to bid for the company's assets via an auction. Cable & Wireless said it expected the auction process to be completed by the end of January, 2002, with the transaction completed during the following month. Other potential bidders include AT&T.
Exodus has been in trouble for some time. Despite having 3,500 customers, including Yahoo and American Airlines, and assets of USD5.9 billion, it was USD4.44 billion in debt. The announcement of a sale will give some relief to shareholders such as Global Crossing, although the offer is worth about 30 percent of the company's net asset value.
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