Gartner Writes Exodus' Epitaph

Lots of analysts have wondered whether Exodus will survive. But Gartner Group analyst Ted Chamberlin ratcheted up the Exodus death watch last night, posting an article on the widely-read C/Net web site advising the hosting company's customers to bail out.

"Gartner believes that Exodus' ability to pull out of its slide without outside help is doubtful," Chamberlin wrote. "Gartner has not yet seen any 'exodus' of businesses away from the Web-hosting market leader. However, the company's uncertain survival should spur businesses to prepare for life after Exodus."

Chamberlin then offers a checklist of Gartner's recommendations, urging them to "examine contracts for exit clauses," develop a transition strategy and solicit services from other providers.

Talk about kicking someone when they're down! Sure, doubts are growing about Exodus' future. But it's one thing to express concern about a company's churn and burn rates, and another thing to recommend that customers switch providers.

I have no doubt that many of Exodus' largest customers are already considering their options in worst-case scenarios. They don't need the Gartner Group to tell them they should do this. Nonetheless, Chamberlin's recommendations could prove damaging. With new business dwindling, Exodus' best chance for survival is to find ways to hold onto its exisiting business.

Is Gartner's advice simply grandstanding by a publicity-hungry research firm? Or is Gartner providing a genuine service for Exodus customers? Tell us what you think.

After The Fire

Network maintenance crews for Internet backbone providers are used to dealing with outages caused by everything from errant backhoes to earthquakes. But this week's fiber outages in Baltimore presented a unique challenge.

On Wednesday, a freight train carrying hazardous chemicals derailed and caught fire in an old railroad tunnel under Howard Street in Baltimore. The fire and hazardous materials quickly damaged several large fiber-optic cables, creating outages in many East Coast cities and slowing Internet performance as carriers sought to reroute traffic.

But it wasn't as simple as finding the damaged cables and fixing them.

"It was immediately apparent to us that we would not be able to access our fiber in the tunnel anytime soon given the situation with the fire and hazardous materials," said Christopher Moore, Director of Operations for Metromedia Fiber Network in Baltimore. "We immediately began looking for an alternate route we could use to fully repair our network."

Metromedia immediately started redirecting network traffic. Meanwhile, the company's field engineering team began the tricky task of rerouting 24,000 feet of cable through a maze of city conduits in the center of Baltimore. Within 36 hours, an alternate fiber route was completed.

WorldCom teams were also working round the clock to lay new cable, and published reports said the networks of PSINet and AboveNet were also affected.

Was your connectivity affected by the Baltimore fire? How long did it take for traffic to return to normal? Add your comments below.

Leasing Recovery 'When Pigs Fly'

Don't expect the data center leasing market to recover until at least the second half of 2002. That's the verdict of CarrierHotels.com readers who participated in our latest online survey.

The 102 respondents were fairly pessimistic. The most popular response, picked by 28.5 percent of participants, was that the market would recover "when pigs fly." The next choice was the second half of 2002, picked by 23.5 percent. Just 8.8 percent saw a recovery beginning in the third quarter of this year, while 9.8 percent predicted a turnaround in the fourth quarter of 2001.

Interestingly, in the past week we received more press releases touting new business than we've seen in many moons. Among them were $25 million in new hosting business for Globix, 30 signed tenants for the NAP of the Americas in Miami, and a $137 million contract between Global Crossing and the Defense Department. Among smaller providers, Solid Systems announced three new tenants for its Baton Rouge facility. Is this an upward blip, or just a lucky confluence of announcements? We shall see.

Our new poll is now online, and asks "What's your current leasing strategy?" Return to our home page (http://www.carrierhotels.com) and check it out.

Who's Selling Exodus? Janus, for sure.

There have been plenty of folks selling Exodus stock in recent months. One of the biggest has been Janus Capital, the mutual fund company that had been Exodus' single largest institutional investor. In a filing with the SEC yesterday, Janus reported that it now owns just 1.49 million shares of Exodus, and has slipped well below the 5 percent ownership threshold that requires SEC filings.

That's a big change from the end of 2000, when Janus held 60.2 million shares of Exodus, a 14 percent stake representing Wall Street's biggest position in the company. Only one other institution (T. Rowe Price, 5.4 percent) owned a 13D-size stake in Exodus.

That means Janus has sold more than 58 million shares of Exodus in the past six months. Meanwhile, a 5 million share block of Exodus changed hands in after-hours trading today, following a session in which EXDS shares slipped another 12.5 percent to $1.40. Is this the completion of Janus' unwinding of its position, or something else entirely? Stay tuned.

Do Denials Help?

After Friday's market close, Level 3 issued a press release disputing a media report that it might file for bankruptcy protection. Level 3 has a policy of "open letters" to shareholders to address potentially damaging rumors.

Setting the record straight is one thing. But does it really help a company to issue press releases denying financial trouble? Or does it just feed the rumor mill even more?

I understand why Level 3 might want to correct rumors about a potential bankruptcy. But consider this: I follow the network infrastructure industry very closely, reading dozens of stories from media outlets and wire services every day. I never saw the story on Bloomberg.com that suggested Level 3 might be a candidate for Chapter 11. But you couldn't miss Level 3's press release, which was picked up by Reuters and appeared on Yahoo and other widely read sites.

Are these denials taken seriously by investors? Consider this precedent: On April 24, 360networks issued a press release denying market rumors that it was out of compliance with its loan covenants. 360networks said it "has always met its debt obligations" and would in the future. Barely two months later, the company was in Chapter 11.

In this market, staying silent in the face of market rumors is difficult. But it's the right response. Press releases like Friday's leave investors wondering if the company doth protest too much.

What do you think? Click on the "comments" link below to add your thoughts, or contribute a "karma" ranking (+ if you agree, - if you think I'm out to lunch on this one.)

Dot-com doom as an economic barometer

"Dot-com deathwatch" sites have provided news, gossip, entertainment and a place for angry employees and investors to vent their spleens. But WebMergers.com has gone a step further, seeking to identify business opportunities and trends by tracking the demise of Internet companies.

WebMergers.com just released its report on dot-com failures for the first six months of 2001. The bad news: 330 Internet-related companies failed in the first six months, compared to 225 in all of 2000. That number included 14 ASPs and 48 infrastructure-related companies.

The good news? The overall pace of failures is slowing, with flat numbers for May and June. But there's a dark cloud within that silver lining - the improvement is due to a drop in the failure of B2C ventures, while B2B (business-to-business) failures now comprise a larger percentage of the overall failure pool.

What does this mean for data center operators? Failures of tenant companies - ISPs, ASPs and colocation providers - likely have a ways to go yet. Managing risk continues to be a high priority for owners and operators of Internet facilities.