Reports: Exodus may face bankruptcy

Troubled Web hosting provider Exodus Communications could file for Chapter 11 bankruptcy as early as this week, according to media reports citing unnamed sources.

According to the report, Exodus is seeking debtor-in-possession financing, which would allow management to keep the company running during a bankruptcy organization.

On the news, Exodus shares dropped more than 50% news to 21¢ per share. The company’s market cap is about $116 million, less than one-fifth its annual revenue run rate.

Exodus recorded a net loss of $584 million in the second quarter and had cash and cash equivalents of $616.8 million on hand. At that time, the company said it expected its cash position to drop to about $200 million by the end of 2001.

Meanwhile, expenses to service the company’s $3 billion debt load and a customer churn rate of 9% have been eating into that cash reserve.

Earlier this month, former Exodus CEO Ellen Hancock resigned and was succeeded by L. William Krause, the former chairman of 3Com.

--Vincent Ryan, senior editor