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C&W buys Exodus biz

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Cable & Wireless, the cash-rich UK telco, is
buying most of the assets of Exodus, the exceedingly cash-poor US managed web hosting firm in Chapter 11, for $850m cash.

The deal could be stymied if another bidder emerges, but very few telcos today could outgun C&W.

C&W is taking on 30 of Exodus' 44 hosting centres - 24 in the US, two in London and one apiece in Frankfurt and Tokyo - adding an additional 4m sqft of floor space.

The company will also take on most of Exodus' clients. It reckons that it needs to pump in an additional US$250m to take the Exodus business to cashflow break even, and that the business will contribute to earnings per share and free cash flow in the financial year ending 31 March 2005.

Exodus produced a Rolls-Royce managed hosting service at Rolls-Royce prices. The company spent billions of dollars of shareholders' money in building its network of data centres and captured 46 of the world's top 150 Web sites as customers.

In May, C&W bought Digital Island, another cash-strapped US hosting firm, for $340m. It says it can extract cost savings through synergies and cross sell products from its IP portfolio to its newly-enlarged customer base. ®

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