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David:
The following is from a recent report by Erik Suppiger of H&Q. Take a tour of the bank of tomorrow:
Internet Data Center Tour Summary
We had the opportunity to tour Exodus' newest data center, the Santa Clara 4 facility, as well as the recently opened Chicago facility. Santa Clara 4 is Exodus' largest data center with125K gross square feet and it opened last month. We believe that Exodus has already booked out its Santa Clara 3 facility, which was ahead of schedule, and the company is rapidly booking Santa Clara 4. Despite the center's immense size, management is so confident in its ability to fill Santa Clara 4, that the company is equipping the entire facility, whereas it usually equips centers in multiple phases. In fact, we believe that Exodus had to adjust its construction process in order to open the facility ahead of schedule.
The Chicago facility opened two months ago and it will be 50,000 square feet when it is completed. Initial bookings are growing rapidly and the center is already 15-20% full, excluding customers from the American Information Systems (AIS) acquisition.
We believe that the data centers provide the most reliable and high performance Internet Data Center infrastructure in the world. Several aspects of their design demonstrate that the company has developed a unique expertise in building data centers, a critical competitive advantage forExodus. For example, we don't believe that Exodus' competitors have data centers that come close to Exodus' combination of scalability or redundancy in terms of floor space, power, environmental control and network connectivity. The company also opened a fully functional London based facility last month without any delays or interoperability issues. We believe that the London facility demonstrates the company's ability to transport its expertise into international markets, which will be critical to Exodus' growth strategy in CY2000.
Preparing For Long-Term Growth
Several aspects of our tours suggest that the company is aggressively preparing for tremendous growth over the next 12 to 24 months. The company has consistently increased the average size of its data centers. We believe that each of the remaining 5 data centers planned to roll out later this year will exceed 100,000 gross square feet. Considering that Exodus only opened its first 100,000 gross square foot center in April, and that it entered 1999 with only 200,000 gross square feet in total, we believe that this suggests that management is distinctly bullish on the company's prospects. We also believe that management is evaluating data center sites in Atlanta and Texas that could be well in excess of 200,000 gross square feet, an unimaginable number just 6 months ago. As a result, we believe that Exodus could exceed the 1.3 million gross square feet that it projected that it will manage by the end of the year. We estimate that Exodus currently has close to 700,000 gross square feet in its data centers.
Management also has agreements for space that is adjacent to the new facilities so that the company can create campus environments when they outgrow the sites that they are starting to build. For example, the company has agreements for space that is close to its recently opened centers in Santa Clara, LA, Chicago, London and Boston. The company is also seeking additional space for its New York facility. We believe that by the end of 1999, management intends to have lease agreements completed for most of the facilities that the company's domestic operations will require in the year 2000. We believe that this will enable management to focus its attention on international expansion in the year 2000.
We believe that Exodus' extensive network of data centers provides a significant barrier to entry that new and existing competitors will be challenged to overcome. The company's ability to penetrate untapped regional markets enables it to rapidly recover the capital costs required to build new data centers. We believe that competitors will be far more challenged to recover their capital investments as they compete with Exodus, the entrenched market leader. We are encouraged by Exodus' success at developing its domestic network of data centers and we believe that the company will effectively extend its strategy into international markets over the next couple years. To that end, we would expect the company to build at least another 10 data centers in 2000. |
