Exodus sees customers losing faith

Analysts have warned customers of Web hosting giant Exodus to make contingency plans in case the company does not receive additional funding or find a buyer after Ellen Hancock resigned as chairman and chief executive.

Confidence has been shaken following two rounds of layoffs, $583 million in second-quarter losses, shareholder lawsuits, lowered financial ratings and Exodus offering a datacenter for sale.

Exodus' problems will make any acquisition difficult, analysts said. Few companies would want to take on its debt and its unhappy customers, especially as telecoms companies offer similar levels of high-availability server space at lower prices.

"It caps off what's been a really hard road for them over the past six months," said John Madden of analyst firm Summit Strategies. "It could be a tough sell, not only because of the economy, but because you have to consider what kind of value they'd bring to the table. Everyone's been watching Exodus wither on the vine."

Regarding the possibility of Exodus attracting new customers, Madden said, "In many people's minds, they're not even a player anymore."

Bill Graham, vice president of technology at ZoomCulture, a US video content specialist and an Exodus customer, said, "I certainly have experienced some of the problems that they've had of late, some difficulty in reaching people." The firm's contract with Exodus runs until next summer, "But I don't know if they'll be a company in July 2002," he said.

Analyst firm Gartner began to warn corporate customers this summer to "be prepared to look for other providers" and to consider "life after Exodus."