Exodus beats estimates, buys services firm

Exodus reports slightly steeper losses but beats expectations by five cents and also announces a professional services acquisition.

Paul Festa Staff Writer, CNET News.com
Paul Festa
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Paul Festa
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Exodus reported slightly steeper losses today but beat Wall Street's expectations by five cents and also made a professional services acquisition.

Exodus, a large-scale Web hosting and services firm, reported a first-quarter net loss of $22.2 million, or $1.09 per share, not counting Exodus's 2-for-1 stock split, which went into effect April 12. For the comparable period last year, the company lost $21.4 million, or $1.07 per share.

Wall Street analysts were expecting a loss of $1.14 per share, according to First Call.

Revenues were up substantially from the first quarter of 1998, to $30.1 million from $7.1 million.

Exodus today also announced the acquisition of Cohesive Technology Solutions, a professional services firm, for $50 million in stock and $50 million in cash. The acquisition is intended to boost the services side of Exodus's business, which has seen marked growth up to the acquisition. Exodus's business is primarily in hosting large firms' Web sites.

"A combination of managed and professional services made up 15 percent of our revenue stream," said Exodus chief executive Ellen Hancock. "We're up to 30 percent with the acquisition, and had said that we expected professional and managed services to hit 20 percent by the end of the year."

The quarter saw Exodus's customer rolls increase to more than 1,000, up from 830 last quarter. With the Cohesive acquisition, set to close in about three months, the company's employees number more than 1,000 as well.

Exodus plans more acquisitions in the areas of professional services, other hosting companies, and firms with technology that will help the service business, Hancock said.

The company's customers are paying more per account, with the average payment up to $148,000 this quarter from $133,000 in the fourth quarter of last year.

"It's a great quarter, a wonderful quarter," said Hancock, a former Apple executive.

Analysts did not disagree.

"The momentum is still there," said Jupiter Communications analyst Preston Dodd. "The fact that they have had this kind of growth for the 10th quarter in a row shows that they're succeeding in solidifying themselves as the industry leader. I think their next frontier is expanding globally."

Exodus is indeed expanding overseas. This quarter it expects to open a hosting data center in London, with a Japanese location scheduled to follow. Three more in Europe and Asia are also planned.

In advance of its earnings announcement, Exodus was up on Wall Street 10 points, or 13.5 percent, to close at 84.