Exodus open to being acquired

Exodus Communications would seriously consider any takeover offer that came its way, CEO Ellen Hancock reportedly said in an interview with USA Today.

The Web-hosting powerhouse has been hit hard by the slumping economy. For the second quarter, Exodus posted an operating loss of $503.3 million while burning though almost $500 million, leaving it with only $616.8 million in cash and cash equivalents. The company’s stock hovers around $1.25, far off its 52-week high of $69.

Word of Exodus’ willingness to sell comes just days after three of the company’s directors resigned. According to a company press release, all stepped down for personal reasons, though reports say they left because they disagree with the direction of the company.

Gregory Gieber, vice president of A. G. Edwards & Sons, said stockholders would welcome a buyout, but Exodus’ $3 billion debt load might discourage potential suitors.

“I think there is a significantly high risk of bankruptcy in this stock,” he said. “It’s kind of a toss-up. A lot depends on the strength of the overall macro economy and the Internet economy, as well as the company’s ability to control its costs over the next six to 12 months.”

According to Gieber, possible acquirers would be telecom companies looking enter or expand their work in the Web-hosting space, or makers of servers and other hardware that also want to begin providing services.

In a press statement, Exodus said that it expects to have the resources to survive as a freestanding company through free cash flow positive in the third quarter 2002. However, “in the interest of good corporate governance, if the company is approached with a reasonable offer, the company has a responsibility to assess and consider the offer on behalf of our stockholders, investors and employees.”