Hancock Exits Exodus

Baldwin Louie — Tue, 04 Sep 2001 15:00:00 -0700

Ellen Hancock, a well-known Silicon Valley executive with more than 35 years in the technology industry, resigned as chairman and CEO of Exodus Communications, the company she built into the largest Web hosting concern before the bursting of the Internet bubble sent it into a tailspin.

Exodus, which announced Hancock's resignation on Tuesday, said it appointed board member L. William Krause as chairman and CEO. Krause, who is president of LWK Ventures, a private investment company in Silicon Valley, retired as chairman of 3Com Corp. in 1993 and has previously served as president of and CEO of Storm Technologies.

Shares of Exodus plunged 21 cents, or nearly 24 percent, to close at 67 cents on news of Hancock's departure as analysts raised the possibility that Exodus could face bankruptcy.

"It is a very bad sign," said Robert Green, an analyst with Briefing.com. "What this probably indicates is she had no other answer except revenue growth. I don't think Exodus is going to grow out of this problem."

Over the past year, Exodus has suffered dual blows from the demise of many of its dot-com customers and an economic slowdown that chilled corporate spending on information technology. In addition, Exodus has amassed more than $3 billion in debt as it sought to fund a rapid expansion of its business.

"The debt problem is not going to go away," Green said. "They are going to have a cash crunch by the end of the year."

In a prepared statement, Krause said the company needed a new plan to adapt to current economic conditions.

"The focus now is to implement an operating plan that reflects the realities of a tough economic environment," Krause said. "We agreed with Ellen that it's time to transition the leadership of the company as it maneuvers through challenging times."

After 30 years at IBM, where she began her career as a programmer, Hancock joined National Semiconductor in 1995. A protégé of then CEO Gil Amelio, she moved to Apple Computer in 1996 to be its chief technology officer, when Amelio became CEO of the personal computer maker. In 1998, she joined Exodus, shortly after the Santa Clara, Calif., company's IPO.

At Exodus, Hancock oversaw a period of dramatic growth as demand for its data hosting burgeoned along with the Internet boom. The company built some 40 data centers around the world to serve an increasing number of marquee customers. But over the past year, Exodus' business unraveled, as losses mounted and customers vanished. Several key executives and three board members left the company over the past few months.

The company has reportedly hired investment banks to advise it on its options, which analysts say could include a refinancing of the company perhaps under bankruptcy protection or an acquisition.

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Hancock Exits Exodus