Exodus Communications Inc, the San Jose-based web hosting and applications management company, posted a first quarter net loss of $22.2m yesterday, and agreed to acquire services company Cohesive Technology Solutions Inc for $100m. The loss was up slightly from the $22.2m loss recorded last quarter, and up from $13.3m reported in the same period last year.
But revenue continued to grow at rates above 40% for the tenth consecutive quarter, and the company saw its first positive growth margin. First quarter revenue was $30.1m, up 43% from the fourth quarter and up 324% from the $7.1m it reported in Q1 last year. And the loss of $1.09 per share was significantly better than the $1.14 per share Wall Street had been predicting.
Cohesive, a 275 person professional services firm from Palo Alto, California, was acquired to boost Exodus’ managed services offerings. Exodus says it has seen a growing demand for its existing managed and professional services offerings as the number of large companies on its books has increased. Internet installations are also becoming more complex, the company said, as firms start to use the internet for business critical functions and to connect up to legacy systems. Nearly 50% of its customers in the first quarter were enterprise customers, bringing the total number of enterprises on the Exodus customer list to approximately 400. President and CEO Ellen Hancock said the shift reflected large companies moving into e-commerce and conducting other business over the internet.
The transaction is expected to close within two to four months. At the beginning of the year, Exodus agreed to acquire the Chicago-based web hosting company American Information Systems Inc, and last October acquired network security consultant and software developer, Arca Systems Inc. Exodus says it now has over 1,000 customers, and that its average annualized revenue per customer has grown from $133,000 per customer in the fourth quarter to $148,000 this quarter.
