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Exodus falls after hitting 4Q target

Exodus Communications (Nasdaq: EXDS) shed 8 percent Thursday after reporting a mediocre fourth quarter and lowering its guidance for 2001. Analysts were mixed on the company's outlook.

Shares were off $2.25 to $25.94 in early afternoon trading.

The company also topped the Street's forecast in its third quarter.

After Wednesday's bell, the company reported fourth-quarter sales of $280.4 million, up 22 percent from the third quarter, and up 177 percent from the yeag-ago quarter.

Net loss excluding the impact of amortization of goodwill and intangible assets was $55.8 million, or 13 cents a share, narrower than First Call's expected loss of 16 cents a share. It was also narrower than 1999's fourth-quarter loss of $48.2 million, or 14 cents a share.

Robertson Stephens analyst Richard Juarez lowered his rating to "buy" despite the better-than-expected results, as the company lowered guidance for 2001.

"As anticipated, the company lowered its previous revenue guidance for FY01 from its initial estimate of $2.4 billion to a range of $2 to $2.3 billion," Juarez wrote in a research report.

Juarez blamed the downward revision to initial revenue projections on four factors: a macroeconomic slowdown and weakening IT spending, Exodus' high exposure to dot-coms (which account for 43 percent of revenue), delays in the opening of some Global Center IDCs and the increased sales cycle associated with larger contract wins.

Juarez also said the company's EBITDA (earnings before net interest expense, income taxes, depreciation, amortization, and other noncash charges) of $26.5 million was $8.7 million below his estimate. The miss was due to the charge the company took for potential bad debt.

SG Cowen International analyst Raj Seth reiterated a "strong buy" but lowered his price target from $55 a share to $45 a share.

"Exodus is a play on a continued trend toward outsourcing of complex Internet operations. We're still early in the migration of business onto the Web and believe that demand will continue to be very robust for years despite short-term pressure resulting from dot-com weakness," Seth said in a reasearch note.

A couple analysts were more optimistic despite the change to 2001 numbers.

Lehman Brothers analyst Harry Blount was enthused about Exodus' lowering of expectations.

"Bookings of new annualized recurring revenue were flat on a sequential quarterly basis," he wrote in a research note. "As we expected would be necessary if this occurred, Exodus lowered 2001 pro forma revenue guidance... we applaud management`s proactive move to establish feasible growth numbers."

Thomas Weisel Partners analyst Jim Linnehan said the closing of the company's acquisition of GlobalCenter has fortified its leading position in the hosting industry and should boost 2001 revenue to $2.27 billion from $1.9 billion.

"While declining growth is an issue we believe the Exodus shares are attractive at current levels and even more so on a possible dip today," the analyst added.

For the fiscal year, Exodus recorded sales of $818.4 million, up 238 percent from the $242.1 million it posted in fiscal 1999.

Net loss for 2000 excluding the impact of amortization of goodwill and intangible assets was $221.5 million, or 54 cents per share, compared to a net loss of $120.9 million, or 36 cents a share, for the prior year.