Exodus at Exodus

Executive turmoil at Web-services leader Exodus Communications is a sign of the times as companies try to refocus on a rapidly evolving Internet market.

Exodus lowered its revenue projections from at least $2 billion to $1.5 billion and will make “cuts” to meet that goal. The company also realigned its management with the recent departures of Don Casey, president and chief operations officer; Beverly Brown, executive vice president and chief marketing officer; and Marshall Case, chief financial officer.

“A lot is happening at Exodus right now,” said Carrie Lewis, e-sourcing strategist for The Yankee Group.

Things looked good in last year's fourth quarter when the company acquired GlobalCenter from Global Crossing and began to move toward a managed-services offering. Then, “suddenly, in the first quarter of 2001, things have slowed down,” Lewis said.

Some problems were waiting for solutions.

“They have some management-talent overlap with GlobalCenter, and the skill sets they need to be a great co-location, Web-hosting company are very different from the value-added services space that they're targeting now,” said Dave Sovie, vice president with Mercer Management Consulting.

And there's the company management.

“My impression is that [chairman and CEO] Ellen [Hancock] isn't a great tactical manager,” said a source speaking on background. “She certainly has lots of experience running big companies and getting stuff done, but it's not clear to me that she's the ideal type of person to handle a company under duress, especially when creativity is an important part of the solution.”

Hancock initially greeted the executive departures with silence. Casey and Brown left two weeks ago, but “frankly, we did not believe that the changes… were important enough to warrant a formal announcement,” Hancock said in a conference call with analysts last week.

Exodus announced Case's departure, and Hancock described the attributes she wants in a new CFO.

‘Frankly, we did not believe that the changes…were important enough to warrant a formal announcement.’
— Ellen Hancock, Exodus

“We're not exactly looking for an accountant,” she said. “We're looking for someone with vision and leadership and who can, with real enthusiasm, work with you to explain our metrics, explain our model, explain why we think it's a good business.”

Apparently this was lacking at Exodus, although that was never said.

“They were vague on purpose,” Sovie said.

Lewis echoed this sentiment. “It's hard to say what's going on there,” she said. “If they're going to bring in a new person, then they have to have some justification for that.”

Other analysts say the executive shakeout simply is part of the ongoing evolution in the Web space.

Peter Christy, research director at Jupiter Media Metrix, called it “a sign of the turmoil” caused by dotcoms withering and brick-and-mortar players being slow to fill the void.

“That's a pretty frightening thing for a company to have to deal with,” Christy said.

Exodus has consolidated its professional services and sales organizations under worldwide sales, marketing and professional services president Sam Mohamad to customize its approach to managed-services customers.

“You don't have one of those shrink-wrapped sales where you can go into a store and buy a retail package,” said Yankee Group analyst Helen Chan. “That's an issue for them because their history has been with co-location.”

It's “a very strange and tough market for a company like that right now,” said Courtney Quinn, senior analyst at The Yankee Group. “But it's not like the Internet is going anywhere. I think everyone just has to realize that the boom we saw may not have been realistic, and we have to re-evaluate business models and see what other value propositions can be offered to the market.”

For Hancock, it's a step toward the future.

“The realignment speaks to our next level of growth,” she said. “We believe that we have a market-leading position, an achievable and fully funded business plan and solid long-term demand for our services.”

The industry certainly hopes so.

“They are the market leader,” Lewis said. “If something happens to them, that's a real serious sign that things are really in trouble in this market.”