To Exit 12 US Data Centers
Will eliminate 3,500 jobs in restructuring Exodus/Digital Island
Nov. 13, 2002 -- Cable & Wireless will shed 19 of its 42
worldwide data centers, including 12 in the US, as it restructures
its Global unit, the company said today.
restructuring will eliminate 3,500 jobs in Global, which includes
Exodus and Digital Island. The company said it will limit its
US business operations to focus on multinational enterprise and
The company did not announce which data centers it would
divest, saying it would implement a "phased withdrawal"
over 12 months. Cable & Wireless indicated that its ongoing
US network would likely be concentrated in major markets where
multinationals are most likely to operate.
of Cable & Wireless lost
a third of their value in London trading following the announcement,
as British investors were unhappy with the scope and cost of the
said it will reduce its US data center network from 27 data centers
to just 15, and the cities it serves from the current 41 to just
11. The company considered a complete exit from the US market,
but ultimately decided that such a move would have hindered its
ability to serve British customers with US operations.
needed to be very hard-nosed about getting out of businesses where
we don't have a competitive advantage," said chairman Graham
& Wireless executives said the remaining facilities would
be "very concentrated in the major cities." It estimated
the cost of escaping its long-term property leases on the 19 consolidated
data centers at approximately $525 million.
assumes we buy out the leases completely on day one," said
David Prince, executive finance director for C&W. "We
also can defer termination costs to save money in the short-term
and defer out cash outlay.
"We're going to be a pragmatic," said Prince. "Where
it makes sense to keep a property in use because of a particular
hosting client, we will do so. If we can (sublease) a property,
we will certainly do that. If we went to a landlord and got a
good deal, we would structure accordingly."
The US data centers, which Cable & Wireless bought from the
bankrupt Exodus Communications in February, are currently about
20 percent filled. They need to be about 30 to 40 percent leased
to be profitable, according to C&W chairman Graham Wallace.
Exodus filed for Chapter 11 bankruptcy protection in Sept., 2001,
saying it had overexpanded as it pursued market share. On Nov.
30 Cable & Wireless announced its intention to acquire most of
Exodus in a deal valued at approximately $850 million.
acquired by C&W include 26 of Exodus' 44 operational data centers,
with approximately 4 million square feet of gross space, along
with 3,200 customers.
Cable & Wireless is a major global telecommunications business
with customers in 70 countries and annual revenues of over $11