Cable & Wireless finalizes purchase of Exodus

Cable & Wireless Friday announced that it has completed its purchase of a majority of Exodus' assets, ending months of uncertainty over the future of the hosting provider and its thousands of customers.

C&W put forth its offer to buy Exodus in November, shortly after the hosting firm filed for Chapter 11 bankruptcy protection. The firms had been awaiting bankruptcy court approval, which was given last month.

Under terms of the deal, C&W will acquire a majority of Exodus' business operations, including its brand name and intellectual property for $750 million. That amount is about $100 million less than was originally announced because of the finalization of certain estimates that had been outstanding, C&W says.

The $750 million price tag includes Exodus assets in the U.K., Germany and Japan, the acquisition of which is in the process of being completed, C&W says. Friday's news, however, immediately brings 26 Exodus data centers, or about 4 million square feet of hosting space, into the C&W family.

Once the overseas transaction is completed, C&W will have 30 Exodus data centers and some 3,200 new customers, C&W says. Analysts say this deal, which follows the telecom company's purchase of managed hosting firm Digital Island last year, shoots C&W into the forefront of the Web hosting industry.

The hosting businesses of C&W, Digital Island and Exodus will combine to form a separate division of C&W that will be led by Bill Austin, who joined Exodus as its CFO July 2001. All hosting services offered by C&W, Digital Island and Exodus will be referred to as "Exodus, a Cable & Wireless Service," the company said.

Graham Wallace, C&W's CEO, says services will continue uninterrupted to Exodus customers. Exodus has been closing data centers over the last few months and affected customers are being migrated over to Exodus facilities acquired by C&W, a C&W spokesman says.

Analysts say the news signifies the end of an era in the hosting market, which supported standalone service providers during the dot-com boom, but has left them with mounting debt as their customer base disappeared. Exodus struggled under a $3.5 billion debt it amassed by building out its network of 44 data centers.

In addition, Exodus spent heavily on multiple high-speed connections to its facilities, a burden C&W won't have since it owns its own global Internet network. In addition, C&W will have $2.83 billion cash in the bank following the Exodus acquisition and the purchase of ISP PSINet Japan, a spokesman says.