Hancock, Exodus part ways

By Jennifer Mears
Network World, 09/10/01

SANTA CLARA - Exodus Communications CEO Ellen Hancock has resigned from the Web hosting firm in a move analysts say is likely aimed at appeasing Wall Street, but does little to help the company.

Exodus announced Hancock's resignation last Tuesday and said William Krause, a member of the Exodus board since June 2000, will take over as chairman and CEO. Krause retired as chairman of 3Com in 1993 and is president of LWK Ventures, an investment company in Silicon Valley.

Krause also served as CEO of Storm Technology, a digital imaging company. He previously held various general management and executive positions at Hewlett-Packard.

In an interview with Network World last month, Hancock said she had no plans to leave the company as it sought to establish itself as a managed Web hosting services provider for corporations.

"I really do believe that this management team can manage this company. We will get through these tough times," she said.

It wasn't clear whether Hancock was asked to step down, although a statement from Krause indicated the decision was mutual.

"We agreed with Ellen that it's time to transition the leadership of the company as it maneuvers through challenging times," Krause said.

Challenging times, indeed. Two weeks ago Exodus announced three members of its board of directors resigned, trimming the board to seven. That news followed the resignations in May of CFO Marshall Case, COO Don Casey and Chief Marketing Officer Beverly Brown. What's more, Exodus has watched its dot-com customer base erode, lowered its revenue guidance, imposed layoffs and reduced capital expenditures for the year from $1.2 billion to $900 million.

It's been a tough year for the once high-flying firm.

"This is a move to appease investors and signal that change is afoot," says Joel Yaffe, a senior industry analyst at Giga Information Group. "What it doesn't do is fix the situation. As much as Ellen got a lot of credit for things that weren't beneath her direct control when things were going well, she's now taking a lot of the blame for things that also aren't within her control."

Melanie Posey, a program manager at market research firm IDC, agrees that Exodus is responding to Wall Street.

"There was so much Ellen-bashing going on, on Wall Street, and they probably figured Wall Street would stop beating up on Exodus if they got rid of Ellen," she says. "I don't understand it. Ellen Hancock didn't single-handedly make the economy tank."

Yaffe says the hope for Exodus now is that it can find a buyer, even with the $3 billion in debt it carries.

"Right now that would be a successful outcome," Yaffe says.

As for corporations, Exodus customers and potential customers should "think twice," Yaffe says. "Right now it's the worst possible situation. The company is limping, and nobody knows when it's going to fall down. The uncertainty is worse than them being bought and then at least you know [what's going to happen]."

Yaffe says Exodus customers he has spoken with are "clearly concerned." He recommends that customers have a contingency plan. "Whether that means mirroring with another provider, whether that means taking their business elsewhere, at least until it's clear what the outcome is going to be."