Exodus raises $800 million

Exodus Communications (Nasdaq: EXDS) said Monday it will sell 13 million shares in a secondary offering and raise $500 million in a convertible bond offering. The deals will raise a total of $800 million--enough to fund the company until it delivers net income in 2003.

Shares in the provider of Internet infrastructure outsourcing were off 2.31 to 20.875, or 10 percent, in early trading Monday. The company, which has been hit as its dot-com customers struggle, lost ground after a mediocre fourth quarter in which it lowered guidance for 2001.

The company said it will use the net proceeds from the offerings for acquisitions and general corporate purposes.

UBS Warburg analyst John Hodulik also noted that the offering should be just enough to fund the company's business plan through to real profitability. Although First Call Corp. expects the company to report an operating profit in the first quarter of 2002, Exodus won't break even on net income--earnings including interest, taxes, depreciation and amortization--until 2003, according to Hodulik's projections.

Specifically, the deal will bring in roughly $800 million, which the company will likely use to fund data center buildout and acquisitions. Hodulik noted that with demand for hosting services rising in Europe and Asia and with the company exploring entry into second-tier markets in the United States, he expects Exodus to revise its business plan to allow for the construction of more data centers.

Hodulik reiterated his "buy" rating Monday and 12-month price target of $55 per share.

Exodus is one of many companies raising cash despite a rocky stock market. Other companies recently raising cash include Adelphia Communications (Nasdaq: ADLAC), XO Communications (Nasdaq: XOXO) and Intuit (Nasdaq: INTU).

The Exodus offerings are managed by Goldman, Sachs & Co., Merrill Lynch & Co., Morgan Stanley Dean Witter and J.P. Morgan Securities Inc.