Ellen Hancock

Like most CEOs, Exodus Communications' Ellen Hancock is more than willing to talk about almost any aspect of her company in macro terms. New strategy, new customers, new data centers — most information is fair game for public consumption. But it's the one piece of information she doesn't want to talk about that speaks volumes about the company.

That is the fact that three major executives — Don Casey, president and chief operating officer; Beverly Brown, executive vice president and chief marketing officer; and Chief Financial Officer Marshall Case — left quietly at the end of April.

Though Exodus did announce Case's departure, the company was forced to hold its second news conference in as many weeks to assure the industry that Exodus isn't in trouble — or at least in the middle of an executive exodus. “Frankly, we did not believe [Brown's and Casey's departures] were important enough to warrant a formal announcement,” Hancock said.

Not everyone agrees.

“To say that means you really don't understand your customers or the market,” says Lisa Perri, senior analyst at Aberdeen Group. “If it were part of a reorganization, then it would be understandable. But to not announce that was incredibly damaging. You really shoot yourself in the foot for not disclosing that.”

Given the shaky Web hosting market, the last thing Exodus can afford to do is lose customer confidence. With the collapse of the dotcom sector that began last year, Exodus has been scrambling to fill in the revenue holes left by big-name accounts such as etoys and pets.com. “Clearly the hosting companies — ourselves included — are being impacted by the loss of the dotcoms,” Hancock says.

Of course, Exodus still has a number of significant accounts — Hotmail, Lycos, eBay and Yahoo among them. But what's a company to do when its core customer base is failing? Hancock says you cast a wider net.

“Our pipeline is beginning to fill back in from these other areas,” she says. “We are currently a very strong hosting partner to many in the B2B side.” B2B customers include airline and retail companies looking to save costs internally by relying on Exodus to host their growing Web businesses.

Despite enterprises filling in where dotcoms have fallen out, Exodus announced a loss of $649.6 million for Q1 2001, compared with a loss of $65.2 million for Q4 2000. Its stock has sputtered around the $10 mark for weeks, down from a 52-week high of $69. That's not nearly as bad as competitors such as PSINet, yet whether the company will ever see its price rebound into the sixties is uncertain.

“I would say our high was probably overstated,” Hancock admits. “On the other hand, if you do the same analysis today we're probably understated. I'm hoping that from a macro sense we have hit bottom and as stocks start to go up, the leaders in this space will get the recognition they deserve.”

Clearly, Hancock believes Exodus deserves a little more respect from the market. But only time will tell whether Exodus' transition from a co-location-only company will ultimately pan out. With the acquisition of GlobalCenter from Global Crossing in January, the company firmly committed itself to the managed services market, which is a significant shift from its original co-location strategy.

Entering into managed services pits Exodus against a new cast of competitors, including Loudcloud and Digex. In order to effectively compete in the space, Exodus is segmenting its 42 data centers to accommodate both traditional Web hosting and hands-off managed service customers.

However, the company announced cutbacks in data center buildouts during its first quarter earnings report, including a planned data center in Munich, Germany. “We are trying to conserve some of our capital so that we really go through this whole market situation correctly,” Hancock says. “But there are some that we just know we need to open — the customers are standing there waiting.”

Hancock claims Exodus is gaining on the managed services market. She also acknowledges that the company's new area of concentration doesn't scale as quickly as other businesses, but says it's a better business model.

It's important for Hancock to sell that business model to her own employees first, especially as they witness the continued fallout of the Internet market. “Exodus has a business model that our employees really understand,” she says. “They know the importance; they know it's not dependent on advertising dollars.”

While Hancock says company morale remains stable, she knows her employees don't live in a vacuum. Exodus has eliminated some positions in recent months — partly to accommodate for overlap after the GlobalCenter acquisition. One of Hancock's first tasks will be to find a new CFO. “We're not exactly looking for an accountant,” she said during the conference call, though it was unclear whether she was indirectly referring to Case.

Regardless of what Hancock says, it's clear she doesn't assume that everyone at Exodus will remain to ride out the market with her.

“Every once in a while there's someone who says, ‘I'm going to go to another start-up.’ And I understand that. They were here before I got here, and they were here because it was a start-up. We're no longer a start-up. We are now a real company — a public company — with a real business plan.”