Exodus Communications Inc continued to see revenue growth rates above 40% sequentially as it posted its second quarter 1999 results on Wednesday – but losses widened as the company increased its spending on data centers to run its data hosting business. Revenue rose 322% to $42.5m compared with the same period last year, and was 41% up from the $30.1m posted last quarter. It was the eleventh consecutive quarter of growth above 40%, the company said. Losses were $20.9m, or $0.51 a share, compared with a loss of $14.1m in the same quarter last year, and were in line with analysts’ predictions. Exodus also announced a stock split on a 2-for-1 basis.
During the quarter, Exodus gained 326 new customers (46% of them classed as enterprises), its largest ever quarterly gain, and now has 1,329 customers in total. It’s also getting more money from each customer. The average annual revenue per customer rose to $157,000 from $148,000 last year. New customers include Nordstrom, Ameritech, Critical Path, News International, OfficeMax, Pets.com and the Virgin Group. Exodus also hosts Microsoft Corp’s HotMail email service. It says it has been seeing increased interest from application service provider companies, and has Corio Inc hosting Peoplesoft applications, among its customer list.
Exodus wouldn’t comment on rumors that it is an acquisition target, but said it was looking for further companies to buy itself. Its third acquisition, May’s $100m deal to buy services company Cohesive Technology Solutions Inc, is expected to close next week. Exodus expects to have added a further 350 people to its ranks by the end of the year. Competition comes mainly from Frontier Corp’s Globalcenter, GTE/BBN, AT&T, Worldcom and Qwest Communications International Inc. Intel Corp has been tipped as a possible new entry into the market later this year.
Five internet data centers were opened during the quarter, including the first international internet data center, based in London. Thirteen are currently active. Further international sites in Germany and Japan are planned, and Exodus says it expects one third of its sites to be situated overseas within the next few years. It will now open six more, rather than the five previously announced, during the next quarter. By the end of the year the plan now calls for 22 ICCs and sites, around 1.5m gross square feet under lease.
Analysts expect the company to move into profit by the first quarter of next year, something which Exodus president and CEO Ellen Hancock said she was comfortable with.
