Exodus sells out to Cable & Wireless

Hosting provider Exodus Communications Inc. has agreed to sell the bulk of its business to London-based Cable & Wireless PLC (C&W) for about US$575 million in cash and the assumption of about US$180 million in liabilities, Exodus announced in a statement Friday.

The deal includes “substantially all of Exodus’ and certain of its foreign subsidiaries’ business,” Exodus said. U.S., Japanese and European customer contracts and employees, certain corporate and Internet data centre assets, know-how, intellectual property, the Exodus brand and other resources will transfer to C&W, Exodus said.

C&W picked 26 of Exodus’ 44 operational data centres, plus four other fully equipped centres. Of these 30 centres, 26 are in the U.S., two are in London, one is in Frankfurt and one is in Tokyo, C&W said in a separate statement. Together, they represent about four million square feet (about 370,000 square meters) of gross floor space, C&W said.

“We are taking over those data centres that fit best with our own data centes,” explained Peter Eustace, a spokesman for C&W in London.

Exodus customers serviced by data centres that are not part of the buyout agreement will be invited to move to one that is, Eustace said.

“We will give those customers the opportunity to switch,” he said, adding that C&W is “committed to hosting services and aims to provide excellent service” to its newly won customers.

Exodus serves 3,500 customers, according to C&W, which said it is taking over “substantially all” of those customers, but won’t at this time detail which are part of the deal and which aren’t.

Customers that likely aren’t part of the agreement with C&W are those customers that are installed in the data centres that are not part of the proposed acquisition, said Robert Rosier, vice-president of operations for Exodus in Europe and managing director of GlobalCenter Netherlands BV.

Those centers that are not part of the deal include four GlobalCenter Inc. data centres in Europe, one in London, one in Paris, one in Amsterdam and one in Munich, Rosier said. GlobalCenter was acquired by Exodus in a US$6 billion deal finalized last January.

At press time, there was no official word as to whether the buyout would affect fate of Exodus Internet Canada Inc.’s (a wholly owned subsidiary of Exodus) Brampton, Ont.-based data centre, set to close in January.

“There are customer contracts that belong to local companies and those contracts can’t just be transferred to Cable & Wireless, especially not when the companies are operating under bankruptcy protection,” said Rosier, noting that contracts signed on corporate level, regardless of where the customer is installed, will be part of the deal with C&W.

“The situation will become clear in the coming weeks,” Rosier said.

The takeover allows C&W to accelerate development of new services and integrated communications and electronic commerce products, C&W said. Also, customers will be offered products from other C&W companies, such as those from the recently acquired Digital Island Inc., which specializes in content delivery.

Exodus filed for protection in the U.S. on Sept. 26 and has been looking for a way out of the trough. A buyout by C&W had been rumored, but the companies were tight-lipped and previously declined to comment on speculation.

This announcement comes shortly after Exodus said it would close some of its data centers.

C&W puts the cost of the Exodus takeover at US$850 million, about US$100 million more than the total value of US$755 million Exodus announced. The discrepancy exists because C&W has “a more conservative view and included absolutely every liability,” Eustace said.

The agreement, which has been approved by the Exodus board of directors, has yet to be approved by the U.S. Bankruptcy Court for the District of Delaware.

Exodus, in Santa Clara, Calif., is at http://www.exodus.com/.

Cable & Wireless, in London, is at http://www.cwplc.com/.